Oct. 19 (Bloomberg) -- Gold declined in London as the dollar strengthened after China unexpectedly raised lending rates, curbing demand for the metal as an alternative investment. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, extended gains after China’s central bank raised one-year lending and deposit rates by 25 basis points, according to a statement posted to the People’s Bank of China’s website today. Gold usually moves inversely to the greenback and some investors buy the metal as an alternative to low rates. “In reaction to the People’s Bank of China interest rate hike the dollar is appreciating and this lowers gold prices,” said Bayram Dincer, an analyst at LGT Capital Management in Switzerland. “Higher global rates are bad for gold.” Immediate-delivery bullion lost as much as $8.45, or 0.6 percent, to $1,360 an ounce and traded at $1,361.25 at 12:28 p.m. in London. Prices reached a record $1,387.35 on Oct 14. Gold for December delivery was 0.8 percent lower at $1,360.60 an ounce on the Comex in New York. Futures reached a record $1,388.10 on Oct. 14. --Editors: John Deane, Stuart Wallace. To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net. To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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