By Nicholas Larkin Nov. 5 (Bloomberg) -- Gold fell in London as the dollar strengthened against the euro and crude oil dropped, diminishing the appeal of the metal as an alternative investment and hedge against inflation. The metal yesterday had its biggest daily gain in almost seven weeks. The dollar rose today on speculation Barack Obama's victory in the U.S. presidential election will accelerate policies to revive the world's biggest economy. Oil declined after investors judged yesterday's 10 percent gain excessive. ``After the U.S. election, the dollar ticked higher a bit and gold is making a correction,'' Afshin Nabavi, a senior vice president at MKS Finance SA, one of Switzerland's four bullion refiners, said by phone from Geneva. Gold for immediate delivery lost $8.80, or 1.2 percent, to $754.45 an ounce as of 10:55 a.m. in London. Futures for December were $3.30, or 0.4 percent, lower at $754 in electronic trading on the Comex division of the New York Mercantile Exchange. Gold rose to $753.25 in the morning ``fixing'' in London, used by some mining companies to sell production, from $741.25 at the previous afternoon fixing. Crude oil fell 2.7 percent to $67.85 a barrel on the New York Mercantile Exchange. The dollar rose to $1.2869 a euro. The relationship between gold and the euro-dollar exchange rate has strengthened this year, with a correlation of 0.60, compared with 0.53 a year earlier. A figure of 1 would mean they move in lockstep. Obama's victory may speed the dollar's recovery against the euro. Obama has proposed a $175 billion package that includes checks for consumers, a tax credit for job creation and spending on public works such as school repairs, roads and bridges. Forecasts Cut Morgan Stanley today cut its 2009 gold forecast by 21 percent to $750 an ounce and its 2010 estimate by 18 percent to $825 an ounce. The metal has slid 27 percent since touching a record $1,032.70 an ounce in March as investors liquidated their commodity holdings to raise cash amid the global credit crisis. ``The improvements in cash market liquidity has reduced the immediate need for investors to carry out mass liquidation and dollar buying,'' James Moore, an analyst at TheBullionDesk.com, said today in a note. Gold in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, held steady at 749.2 metric tons yesterday, according to figures posted on the company's Web site. ``Physical demand is very strong'' while ``the cost of production worldwide is rising,'' Peter Hambro, chairman of Peter Hambro Mining Plc, the second-biggest gold producer in Russia, said by phone today. Near-term, there will be ``little downward pressure on prices.'' Among other metals for immediate delivery, silver fell 0.2 percent to $10.20 an ounce. Platinum declined $6.50, or 0.8 percent, to $845 and palladium was $2, or 0.9 percent, higher at $214 an ounce. Morgan Stanley also cut its 2009 platinum forecast by 37 percent to $950 an ounce and said palladium will trade 32 percent lower than previously expected next year at $190 an ounce. To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

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