NEW YORK (MarketWatch) -- Gold futures fell Tuesday as a stronger U.S. dollar reduced the precious metal's appeal as an alternative investment.
Continued expectations of a global slowdown also weighed on crude oil prices, and other commodities, reducing demand for gold as an inflation hedge.
Gold for December delivery lost $17, or 2.5%, to $772.80 an ounce in early trade.
The dollar rose to the highest in 19 months against the euro, as currency markets focused on the U.S. financial rescue package and further stimulus hoped to provide a needed boost to the economy. See Currencies.
Some gold analysts, however, remain optimistic that the financing necessary to support the financial system and the U.S. economy will eventually weaken the dollar, and lift gold.
"[Federal Reserve Chairman Ben] Bernanke's proposed stimulus package shows that his helicopters are well and truly dumping dollars on America like confetti at a ticker tape parade," said Mark O'Byrne, executive director of Gold & Silver Investments.
"While this may be bullish for stock markets in the short and medium term it is likely to have serious ramifications for the dollar and the global monetary system in the coming months," he said.
On Monday, the precious metal gained $2.30, or 0.3%, to end at $790 an ounce on the Comex division of the New York Mercantile Exchange. The metal had lost 8.3% last week, its biggest weekly decline in two months, as investors sought out cash amid turbulence in global markets.
Signs of stabilization in global markets were therefore seen as helpful to gold, a counter-intuitive move for the precious metal, which normally tends to benefit from safe-haven flows.
On Tuesday, shares on Wall Street opened under pressure as earnings reports from the likes of chip maker Texas Instruments Inc. and chemical giant DuPont Freeport-McMoRan Copper & Gold Inc. shares fell 7.5% after the metals miner on Tuesday said third-quarter net income fell by a third from the year earlier, and came in below analysts expectations. Average realized price per pound for copper fell 11% to $3.14 per pound from $3.53 per pound.
