By Chanyaporn Chanjaroen June 28 (Bloomberg) -- Gold dropped in New York as the dollar strengthened, lessening the metal’s appeal as an alternative investment. The U.S. Dollar Index, a gauge of the U.S. currency against six major monies, gained as much as 0.3 percent. The precious metal usually moves inversely to the currency. “The dollar was a little bit stronger so gold traded a bit lower,” said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. Prices may fall to as low as $1,230 an ounce, he said. Gold for August delivery was 60 cents lower at $1,255.60 an ounce on the Comex in New York as of 8:53 a.m. local time. The contract ended last week down 0.2 percent. The metal for immediate delivery dropped 0.1 percent to $1,254.60 an ounce in London. Gold, up 14 percent this year, is set for a 10th straight annual increase as investors seek to protect their wealth against the crisis in Greece and other European nations struggling to repay debt. The euro has lost almost 14 percent this year against the dollar, prompting investors to buy gold products including coins. Prices of the metal rose to records in dollars, euros, pounds and Swiss francs this month. Bullion gained to $1,256 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,254 at the June 25 afternoon fixing. Hedge-fund managers and other large speculators increased their net-long position in gold futures on the Comex in New York by 4 percent to 238,634 contracts in the week ended June 22, the U.S. Commodity Futures Trading Commission said. That is the highest since December. A long position is a bet on rising prices. ‘They’re Fickle’ “The only people buying gold here are investors,” Kaplan said. “They’re fickle.” Prices may go higher on more investment purchases as people seek to protect their wealth against depreciation of currencies, Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland, said today in an e-mail. He forecast prices to rise to $1,300 an ounce in two months. “Gold is the ultimate currency and the ongoing global currency substitution in favor of gold will continue,” Dincer said. Should the price continue to rise, consumers in India, the world’s biggest gold user, may increase recycling of jewelry and trim imports, according to Tribhovandas Bhimji Zaveri Pvt., the Asian nation’s oldest retailer of gold jewelry. India’s gold imports slumped to between 16 and 17 metric tons in May, from 34 tons in April, Citigroup Inc. economists Rohini Malkani and Anushka Shah said in a report June 21. ETF Record Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, were unchanged at a record 1,316.18 tons on June 25, according to the company’s website. Global holdings of the metal by ETFs rose four tons to 2,062.6 tons June 25, according to Bloomberg data from 10 providers. Gold held in ETF Securities Ltd.’s European exchange-traded products rose to a record $10 billion, accounting for half of the provider’s total global assets under management, the London- based company said today in a report. “European investors’ demand for hard assets, particularly precious metals, continues to grow as they look to reduce their exposure to counterparty and currency-depreciation risks,” Hector McNeil, a London-based managing partner at ETF Securities, said in the report. Silver for immediate delivery, having rallied 13 percent this year, will rise to $22 an ounce before December, said Daniel Brebner, an analyst at Deutsch Bank AG in London, whose fourth-quarter outlook was accurate to within 0.7 percent. Silver futures for September delivery slid 0.1 percent to $19.135 an ounce in New York. Platinum futures for October settlement rose 0.8 percent at $1,586.50 an ounce, and palladium futures for September delivery increased 1.1 percent at $482.90 an ounce. --With assistance from Madelene Pearson in Mumbai, Pham-Duy Nguen in Seattle and Nicholas Larkin in London. Editors: John Deane, Claudia Carpenter. To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net. To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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