July 2 (Bloomberg) -- Gold declined in New York and London as a stronger dollar reduced demand for the precious metal as an alternative investment. The U.S. Dollar Index, a six-currency measure of the greenback’s value, gained as much as 0.7 percent after a Chinese Foreign Ministry official said he was “not aware” of a plan to discuss a new reserve currency at next week’s Group of Eight meeting. The dollar also strengthened against the euro as European Central Bank policy makers left the benchmark interest rate at a record low. “The U.S. dollar reserve currency debate, lower demand in the summertime and lower ETF holdings could continue to drive the market,” Pradeep Unni, a Richcomm Global Services analyst in Dubai, said in a note, referring to exchange-traded funds. Gold futures for August delivery slid $11.40, or 1.2 percent, to $929.90 an ounce by 8:37 a.m. on the New York Mercantile Exchange’s Comex division. The contract gained 1.5 percent yesterday after two declines in a row. Bullion for immediate delivery in London fell $9.63, or 1 percent, to $931.17. The metal slipped to $936 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $938.25 at yesterday’s afternoon fixing. Spot prices are heading for a fourth weekly decline in five weeks. Gold futures, which typically moves inversely to the U.S. currency, lost 5.4 percent last month as the dollar index added 1 percent. A report today showed the U.S. unemployment rate rose to a 26-year high. That may spur demand for major currencies as a refuge. ETF Bullion Investment in the SPDR Gold Trust, the biggest ETF backed by bullion, was unchanged at 1,120.55 metric tons yesterday after dropping by 5.19 tons on the previous day, the company’s Web site showed. Bullion held in ETF Securities Ltd.’s exchange- traded commodities added 0.7 percent to 7.64 million ounces yesterday, its Web site showed. Silver for September delivery lost 2 percent to $13.49 an ounce in New York. Platinum for October fell 1.3 percent to $1,190 an ounce, and palladium for September was 2 percent lower at $249.80 an ounce. ETF Securities’ silver holdings slipped 4 percent to 19.09 million ounces yesterday, the company’s Web site showed. Platinum and palladium assets were little changed. Morgan Stanley raised its 2009 estimate for silver by 11 percent to $14.04 an ounce. A global recovery may boost industrial usage, while investment demand remains “resilient,” it said in a report dated yesterday. The metal is employed in products from chemical catalysts to ball bearings, according to the Web site of the Silver Institute. The bank increased its 2009 platinum forecast by 12 percent to $1,181 an ounce and raised this year’s palladium estimate by 21 percent to $226 an ounce, citing “signs of improvement” in U.S. auto demand. Automakers account for about 60 percent of platinum and palladium use, according to London-based metals researcher, refiner and trader Johnson Matthey Plc.

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