Gold declined in London for a third day as the dollar strengthened, reducing the metal’s appeal as an alternative investment to the U.S. currency. The dollar gained as U.S. President-elect Barack Obama crafted a package of infrastructure spending and tax cuts to create 3 million jobs. Bullion, which typically moves in the opposite direction to the U.S. currency, has lost 2.3 percent this year, while the dollar has added 2 percent against the euro. “There’s been some selling as the euro weakened against the dollar,” Afshin Nabavi, a senior vice president at MKS Finance SA, one of Switzerland’s four bullion refiners, said by phone from Geneva. Trading is “still choppy” as many market participants are returning from holidays, he said. Gold for immediate delivery fell $13.74, or 1.6 percent, to $861.66 an ounce by 10:44 a.m. in London. February futures dropped $16.80, or 1.9 percent, to $862.70 in electronic trading on the Comex division of the New York Mercantile Exchange. The metal declined to $860 in the morning “fixing” in London, used by some mining companies to sell production, from $874.50 at the afternoon fixing on Jan. 2. Gold rose 5.8 percent in London last year, a record eighth annual advance. Crude oil added 2.2 percent to $47.38 a barrel in New York trading after climbing as much as 5.1 percent to $48.68 a barrel. The commodity gained after Israeli troops entered the Gaza Strip, escalating the 10-day-old conflict and threatening stability in the Middle East, the largest oil-producing region. ‘Increased Currency Volatility’ “Further oil appreciation should anchor precious metal prices in an environment of increased currency volatility,” Manqoba Madinane, a commodity analyst at Standard Bank Group Ltd. in Johannesburg, wrote in a report. Sixteen out of 24 traders, investors and analysts surveyed from Mumbai to Chicago from Dec. 30 through Jan. 2 said gold may rise for a fifth straight week on speculation that the recession will deepen in 2009 and global political tensions will heighten. Four said to sell, and four were neutral. The metal will trade at $800 an ounce in one and three months from now, UBS AG analyst John Reade said today in a note. “Unless the dollar remains weak, gold could succumb to some profit taking,” he said. “We are seeing no jewelry demand at the moment and while safe haven buying of coin and bars continues, this may not be enough to drive gold higher.” Amongst other metals for immediate delivery in London, silver slipped 3.5 percent to $11.1663 an ounce. Platinum declined $15, or 1.6 percent, to $931.50 an ounce, and palladium was 3.4 percent lower at $186 an ounce.

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