BLBG: Gold Falls for Third Session as Dollar Climbs; Platinum Gains
Gold prices fell for the third straight session as the dollar’s rally reduced demand for the precious metal as an alternative investment. Platinum gained.
The dollar has climbed 3.5 percent against a weighted basket of six major currencies since Dec. 29. Gold and other precious metals generally move in the opposite direction of the U.S. currency. Last year, gold rose the least since 2004 as the dollar advanced for the first time since 2005.
“If the dollar continues to show this kind of strength, gold is going to be vulnerable,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “People feel like the U.S. is going to pull out of the recession ahead of the euro zone and the rest of the world. That’s why we’re seeing strength in the dollar.”
Gold futures for February delivery fell $12.20, or 1.4 percent, to $845.60 an ounce at 11:22 a.m. on the New York Mercantile Exchange’s Comex division. The metal dropped 3 percent in the previous two sessions.
Silver futures for March delivery dropped 12.5 cents, or 1.1 percent, to $11.145 an ounce.
The dollar rose to a three-week high against the euro on speculation the European Central Bank will be forced to cut interest rates more than forecast as inflation slows in the region and the recession deepens.
The Federal Reserve has already lowered U.S. borrowing costs close to zero. The ECB’s benchmark rate is 2.5 percent.
Gold moved in tandem with the euro 80 percent of the time last year, analysts at Societe Generale said today in a report.
‘Resounding Thump’
“Once the dollar started to rally, gold came down with a resounding thump,” Societe Generale said. “Deleveraging in the first half of this year will keep gold under some pressure and rallies may be false dawns.”
The bank predicted gold will average $650 this year. Gold futures averaged $874 in 2008.
Some investors bought platinum on speculation that government bailouts of U.S. automakers and proposed tax cuts for consumers will revive demand for cars.
About 60 percent of platinum is used in pollution-control devices in autos. The metal tumbled 38 percent last year.
Platinum futures for April delivery rose $7.40, or 0.8 percent, to $965 an ounce on the Nymex. Palladium futures for March delivery gained $11.35, or 6.1 percent, to $196.30 an ounce.
