By Nicholas Larkin Nov. 6 (Bloomberg) -- Gold fell in London on expectations that central banks in Europe will cut interest rates, buoying the dollar and reducing the appeal of the metal as an alternative investment. European Central Bank and Bank of England policy makers meet today and will probably reduce rates a half point, according to Bloomberg surveys. 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. ``Markets will keenly await the expected 50 basis-points cut by the ECB and BOE today,'' Walter de Wet, an analyst at Standard Bank Ltd. in Johannesburg, wrote in a note. Rate cuts may ``lead to further euro weakness against the dollar.'' Gold for immediate delivery lost $1.30, or 0.2 percent, to $739.05 an ounce as of 10:38 a.m. in London. Futures for December were $4, or 0.5 percent, lower at $738.40 in electronic trading on the Comex division of the New York Mercantile Exchange. The metal fell to $739 in the morning ``fixing'' in London, used by some mining companies to sell production, from $753.75 at the previous afternoon fixing. The BOE will announce the rate decision at midday London time and the ECB at 12:45 p.m. Gold lost 3 percent in London yesterday following a 5.5 percent climb the previous day. European and U.S. equities also fell yesterday amid investor concern that Barack Obama, the U.S. president-elect, will have to contend with an economy pummeled by the fastest contraction in manufacturing in 26 years. `Full Control' ``The bears are back in full control after bulls across the globe realized that current economic problems cannot be voted away,'' de Wet said. ``The loss in confidence and accompanied fear is weighing heavily on commodities.'' Bullion has slipped 28 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. ``There's a lot of pressure on gold at the moment as people liquidate their positions to cover their losses,'' Randgold Resources Plc Chief Executive Officer Mark Bristow said in an interview in London today. Still, ``every big gold miner is cutting back on capital, reducing their project development program and that's going to put pressure on physical supply.'' Investec Securities cut its 2009 price forecast to $825 an ounce from $875, citing a potential U.S. economic recovery late next year that may reduce investment demand for gold. Investec cut its 2008 forecast to $885 an ounce from $925. Among other metals for immediate delivery, silver added 0.4 percent to $10.37 an ounce. Platinum declined $8, or 0.9 percent, to $863.50 and palladium was $5.25, or 2.4 percent, higher at $224.75 an ounce. Platinum, used in autocatalysts, rose 2.4 percent yesterday after Anglo Platinum Ltd. said a fire at its Polokwane smelter in South Africa may cut production by as much as 200,000 ounces this year. Anglo is the world's biggest platinum producer. The metal slipped to $862 an ounce in this morning's fixing in London from $870 at the previous afternoon fixing. To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

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