BLBG: Gold Falls as Stronger Dollar May Undermine Bullion as Asset
By Feiwen Rong
Oct. 8 (Bloomberg) -- Gold fell for the first time in three days on concern the deepening credit crisis may depress the value of the euro against the dollar, undermining bullion's appeal as alternative asset.
Gold, up 6.2 percent in the past two days, eased as the U.K. and Spain raced to buttress their banking systems after European policy makers failed to agree a regional rescue plan. The euro, down 5.1 percent against the dollar this month, stalled on increasing investor speculation the Federal Reserve will reduce its benchmark rate by 50 basis points by the end of the month.
``Gold has gained more than $100 since the collapse of Lehman Brothers more than three weeks ago,'' Ronald Leung, director at Lee Cheong Gold Dealers (Hong Kong) Ltd., said by phone today. ``Now investors are keenly watching where the euro might be going. If the euro is under pressure, so is gold.''
Bullion for immediate delivery fell $4.20, or 0.5 percent, to $882.90 an ounce at 11:26 a.m. in Singapore, after touching $891.09 yesterday, the highest since Oct. 1. Silver for immediate delivery was little changed at $11.575 an ounce.
The euro last traded at $1.3590 in Asia, barely changed from its close in New York yesterday. It touched $1.3444 on Oct. 6, the weakest since August 2007.
``So far the European countries have shown no sign of working out some coordinated bailout plan like the U.S. did, as they are all going their own ways,'' Leung said.
British Prime Minister Gordon Brown is preparing a package that will include injecting capital into struggling banks. Spain will spend as much as 50 billion euros ($68 billion) to buy bank assets, the first European nation to copy the U.S. strategy.
Federal Reserve Chairman Ben S. Bernanke signaled the bank was ready to lower interest rates further as the widening credit crisis sent U.S. stock indexes to four-year lows. Interest-rate futures show a 68 percent chance the Federal Reserve will reduce its benchmark rate by 50 basis points to 1.5 percent by the end of the month, up from a 42 percent chance Oct. 6.
December-delivery gold rose 0.3 percent to $885 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange. Gold for December delivery in Shanghai rose 1.9 percent to 194.28 yuan a gram ($886 an ounce).
Gold for August delivery advanced 0.4 percent to 2,845 yen a gram ($874 an ounce) on the Tokyo Commodity Exchange at 11:00 a.m. local time break.
To contact the reporter on this story: Feiwen Rong in Singapore at frong2@bloomberg.net
