Gold may fall in London, extending last week’s plunge, on concern that a strengthening dollar will curb demand for the metal as an alternative investment. Gold dropped last week as the dollar climbed to an 11-month high versus the euro. The greenback was little changed today. Fitch Ratings lowered its outlook for France’s credit ranking to negative from stable on Dec. 16, saying the country’s budget deficit and government borrowings make it more vulnerable to the region’s debt crisis than other top-rated euro-zone nations. A stronger dollar “is likely to weigh upon gold prices in the absence of strong physical demand over the remaining weeks of the year,� Suki Cooper, an analyst at Barclays Capital in New York, wrote in a report today. “Longer term, gold still possesses structural pillars of support in an environment of negative real interest rates and rising inflationary pressures, as well as continued central bank buying.� Bullion for immediate delivery fell $3.77, or 0.2 percent, to $1,595.18 an ounce by 11:15 a.m. in London. Prices dropped 6.6 percent last week, the most since Sept. 23, and touched a two-month low of $1,560.97 on Dec. 15. Gold for February delivery was little changed at $1,597.20 on the Comex in New York. The metal was steady at $1,593 an ounce in the morning “fixing� in London, used by some mining companies to sell output, compared with $1,594 at the afternoon figure on Dec. 16. Prices will average $1,810 next year as central banks buy between 400 metric tons and 600 tons, Goldman Sachs Group Inc. said today in a report. It has averaged $1,572 this year. ETP Holdings Gold, up 12 percent this year, reached a record $1,921.15 on Sept. 6 as investors sought to diversify away from equities and some currencies amid concerns that the euro zone may fragment. Since then, it’s lost 17 percent. Holdings in exchange-traded products backed by bullion dropped 1.3 tons to 2,346.2 tons on Dec. 16, data compiled by Bloomberg show. Assets reached a record 2,360.8 tons on Dec. 14. The dollar gained as much as 0.5 percent versus the euro today after North Korean state television said national leader Kim Jong Il died, spurring concern instability may increase in the region and boosting demand for the U.S. currency as a haven. “Gold is still an attractive investment, and while a stronger dollar will cap gains, prices should remain supported as there are many buyers looking out for a bargain,� said Tao Jinfeng, chief investment consultant at Haitong Futures Co., China’s largest brokerage by registered capital. Silver for immediate delivery fell 2.4 percent to $29.04 an ounce, taking its loss this year to 6.1 percent. Platinum was 0.4 percent lower at $1,414.25 an ounce and is down 20 percent this year. Palladium was little changed at $623.75 an ounce. Prices dropped 22 percent in 2011. To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net

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