Gold fell in London, heading for a second monthly decline, as a rally in equities and a rebounding dollar curbed the precious metal’s appeal as an alternative investment. The MSCI World Index of shares climbed to the highest in more than three months as speculation grew that the worst of the global recession is over. The Federal Reserve yesterday left the size of the central bank’s buyback program for U.S. government debt unchanged and said the pace of the economy’s contraction “appears” slower. “When stock markets are rising, there’s more risk appetite, and commodities like gold suffer,” Sagiv Peretz, a senior dealer at trading-system operator Finotec Trading U.K., said by phone from London. “The dollar is also coming back.” Bullion for immediate delivery slipped as much as $10.38, or 1.2 percent, to $897.63 an ounce and traded at $888.97 by 11:16 a.m. local time. The metal has dropped 2.3 percent this month. June futures lost 1.2 percent to $889.30 in electronic trading on the New York Mercantile Exchange’s Comex division. The metal fell to $889 in the morning “fixing” in London, used by some mining companies to sell production, from $898.25 at yesterday’s afternoon fixing. The Fed yesterday kept the target range for the federal funds rate unchanged at between zero and 0.25 percent. U.S. consumer spending jumped the most in two years last quarter even as gross domestic product fell at an annual 6.1 percent rate. ‘Bargain Hunters’ “Every time we see this kind of drop in gold, bargain hunters come back into the market,” Peretz said. The decline in GDP and the “still gigantic” buyback program means that gold may strengthen because of a potentially worsening economy and currency devaluation, he said. The U.S. Dollar Index was down 0.2 percent after earlier losing as much as 0.7 percent. The precious metal tends to gain when the dollar weakens. The Fed’s decision to continue asset purchases means “the U.S. currency would get further devalued against the major currency pairs, urging investors to seek safe haven in gold,” said Pradeep Unni, an analyst at Richcomm Global Services DMCC in Dubai. India, the world’s biggest buyer of gold, imported 15 to 20 metric tons this month, up from near-zero in February and March, according to the Bombay Bullion Association Ltd. The total is down from about 25 tons in April last year. Sales in the country during the annual Akshaya Tritiya Hindu festival declined 8 percent this year to 45 tons, the World Gold Council said. Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was unchanged at 1,104.45 tons for a fifth day yesterday, according to the company’s Web site. Among other metals for immediate delivery in London, silver was fell 1.1 percent to $12.615 an ounce. Platinum added 1.3 percent to $1,111.75 an ounce, and palladium increased 0.2 percent to $221.50 an ounce.

Source