Gold declined in London, snapping a two-day advance, after the dollar climbed, reducing the appeal of the precious metal as an alternative investment. The euro fell for a second day, dropping to a three-week low against the dollar, after Dutch newspaper Het Financieele Dagblad cited European Central Bank Governing Council member Nout Wellink as saying the euro region’s emergency fund should be doubled. The currency was also dragged lower on concern a reshuffling of Greek Prime Minister George Papandreou’s Cabinet will lead to a renegotiation of aid terms. “A stronger dollar is hurting gold, and we are also seeing some profit-taking,” VTB Capital analyst Andrey Kryuchenkov said by phone from London today. “Still, gold remains well- supported because there is too much uncertainty over the European sovereign debt crisis. Should risk aversion worsen from here, we’ll probably see gold rallying back to its May highs.” Immediate-delivery gold fell 0.3 percent to $1,526.60 an ounce at 9:20 a.m. in London. Gold for August delivery was little changed at $1,526.10 an ounce on the Comex in New York. Gold has declined 3.2 percent since touching a record $1,577.57 on May 2. Still, it’s up 7.4 percent this year, as investors seek protection against sovereign-debt turmoil in Europe and accelerating inflation. The U.S. Dollar Index, a six-currency gauge of the dollar’s strength, rose as much as 0.4 percent after yesterday rallying 1.7 percent, the most in 10 months. Dollar Strength “The strength of the dollar is a reason for today’s downward push,” said Bernard Dahdah, a London-based analyst at Natixis Commodity Markets Ltd. Greece’s Papandreou will reshuffle his Cabinet today and seek a confidence vote, battling to control a shrinking majority and pass austerity measures demanded by international lenders. Papandreou sought to reassert his authority in a televised address last night hours after police used tear gas to break up protests in central Athens and media reported he was in talks to step down in favor of a unity government. The political turmoil came as European Union talks on forging a new bailout to prevent the first euro-area default stalled. The European Central Bank said yesterday the threat of the Greek debt crisis spilling over into the banking sector is the biggest risk to financial stability. Spot silver declined as much as 1.4 percent to $35.295 an ounce, and was lastly 0.6 percent down at $35.595. Spot palladium lost 0.8 percent to $769.50 an ounce and platinum dropped 0.3 percent to $1,771.50 an ounce. To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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