Gold slid the most in two months as the rallying US dollar reduced demand for the metal as an alternative investment. Silver also slumped.
The US Dollar Index, a six-currency gauge of the greenback's value, rose as much as 1.4 per cent after Japanese Finance Minister Kaoru Yosano said his nation's confidence in US debt is ``unshakable.'' In a June 10 interview, Yosano also said the dollar's status as the world's reserve currency isn't threatened. Gold typically moves inversely to the US currency.
The US dollar's rise ``put a little bit of pressure on gold,'' Bernard Sin, the head of currency and metals trading at Swiss refiner MKS Finance SA, said by telephone from Geneva. ``The dollar may rebound in the short term, but longer term, it's going to continue to weaken.''
Gold futures for August delivery tumbled $US21.30, or 2.2 per cent, to $US940.70 an ounce on the New York Mercantile Exchange's Comex division. The decline was the sharpest since April 6 and left the metal down 2.3 per cent for the week, the second-consecutive weekly drop. Gold still has gained 6.4 per cent this year in New York.
In London, bullion for immediate delivery dropped $US14.61, or 1.5 per cent, to $US939.33 an ounce.
Some investors buy gold as a store of value in times of heightened international tensions and sell the metal when those tensions ease.
Iranian Presidential vote
In Iran, voters went to polls today as President Mahmoud Ahmadinejad, 52, sought a second term, touting accomplishments including advancing the country's nuclear and aerospace technologies. Those steps have raised concerns in the West that Iran is developing atomic weapons and long-range missiles capable of reaching Israel and parts of Europe, which may have made Ahmadinejad vulnerable to a more moderate challenger.
``Pressure may also be coming from early news that a moderate candidate'' may win, Tom Pawlicki, an MF Global analyst in Chicago, said by e-mail. ``Such news would be bearish for gold.''
Voting was extended to 10 p.m. local time, four hours later than usual, as an ``unprecedented'' number sought to cast their ballots, according to Kamran Daneshjou, head of Iran's election commission. Initial vote counts may be released early tomorrow and conclusive results may be known by later in the day.
Gold slipped to $US937.25 in the afternoon ``fixing'' in London, used by some mining companies to sell their output, from $US950 in the morning fixing. Spot prices are headed for a second straight weekly decline in London.
Resistance seen
``It's getting increasingly tough to hold onto its gains beyond $US965-$US966 levels,'' Pradeep Unni, an analyst at Richcomm Global Services in Dubai, said in a note. ``Repeated failures to break and hold above this zone has triggered selloffs.''
Bullion may average $US825 an ounce next year, down from a previous forecast of $US950, BNP Paribas said yesterday in a report. The bank raised its 2009 projection to $US925, from $US900.
``We believe that deflation rather than inflation is the biggest risk facing the global economy in the coming months,'' Anne-Laure Tremblay, a London-based Paribas analyst, said in the report. Still, ``safe-haven demand should remain strong throughout this period, as the road to recovery should be long and bumpy.''
`Positive' outlook
``The outlook is still generally positive, as we must not lose sight of the forest through the trees,'' MF Global's Pawlicki said. ``Commodity investment is still relatively strong and the outlook for the dollar isn't favorable.''
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was unchanged for a fourth session at 1,132.15 metric tons as of yesterday, the company said on its Web site.
Silver for July delivery fell 61.8 cents, or 4 per cent, to $US14.875 an ounce in New York, declining 3.3 per cent for the week, the second-consecutive weekly drop. The most-active contract still has gained 32 per cent this year.
Silver for immediate delivery slid 57 cents, or 3.7 per cent, to $US14.835 an ounce at 8:50 p.m. in London, heading for a second-straight weekly decline.
Silver held by ETF Securities Ltd. to back its exchange- traded securities rose to a record 20.223 million ounces yesterday, from 20.194 million ounces the day before, according to data on the company's Web site. The total was unchanged today.
