Gold fell for a second day as concern that the European debt crisis is worsening drove the euro lower against the dollar, damping demand for commodities including bullion priced in the U.S. currency. Gold for immediate delivery shed as much as 0.5 percent to $1,770.07 an ounce, and traded at $1,772.07 at 1:44 p.m. in Singapore. It reversed a 0.4 percent advance as Standard & Poor’s Ratings Services cut Italy’s credit rating by one level yesterday on mounting government debt and weakening growth prospects, sending the euro and Asian stocks lower. “Gold’s relationship with the dollar has been on and off the whole year,” said Zhang Qian, an analyst at Haitong Futures Co., China’s largest brokerage by registered capital. “For now, the dollar’s strength may limit gold’s gains.” December-delivery bullion in New York fell as much as 0.4 percent to $1,772 an ounce, after rising 0.5 percent earlier. The dollar rose for a third day against a six-currency basket including the euro as investors sought to diversify away from declining equities and commodities. “There is scope for gold to rally as Europe’s problems cannot be settled overnight and Italy’s rating downgrade is an example of this,” said Zhang. “The situation in Greece is very serious and the possibility of contagion across Europe is very real. As for the U.S., there still aren’t clear signs that the economy there is healthy.” Rescue Funds Italy joins Spain, Ireland, Portugal, Cyprus and Greece in having their credit ratings downgraded this year. Greece will hold another call today with its main creditors after a “productive” round of discussions with European Union and International Monetary Fund officials yesterday about securing a sixth installment of rescue funds aimed at staving off default, according to the finance ministry. In the U.S., Federal Reserve policy makers will gather in Washington today for a two-day meeting to discuss whether additional measures are needed to spur the economy amid data economists say may show that construction of new homes fell. Cash silver dropped as much as 1.2 percent to $39.1725 an ounce, while palladium traded little changed at $714.88 an ounce. Spot platinum fell 0.4 percent to $1,766.13 an ounce. To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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