--Comex April gold down $9.90, or 0.6%, at $1,712.30 a troy ounce
--Dollar rises as traders unwind stimulus bets; gold, silver pressured
--Physical buying, easy-money policies could spur rebound from this week's gold slide
By Matt Day
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Gold fell on Friday as strong gains in the dollar left less appetite for the precious metal as an alternative asset.
Gold for April delivery, the most actively traded contract, was recently down $9.90, or 0.6%, at $1,712.30 a troy ounce on the Comex division of the New York Mercantile Exchange.
The dollar snapped higher Friday as some traders closed out bets against the currency. Some investors had been expecting a third round of asset purchases from the Federal Reserve, which would likely weigh on the dollar and send investors seeking gold as an alternative.
But that outlook unwound this week. Testimony from Federal Reserve chairman Ben Bernanke offered no clues about another round of monetary stimulus, sparking a dramatic selloff in gold Wednesday as investors saw less need for the metal as a currency hedge.
The ICE US Dollar Index, which tracks the currency against those of some major U.S. trading partners, on Friday moved to it highest level since Feb. 22, dragging on dollar-denominated gold.
"Metals continue to languish in the aftermath of the Wednesday sell-off," traders with TD Securities said in a note.
Silver, which can also draw interest as a currency alternative, slumped with gold Friday. Silver for May delivery, the most actively traded contract, was recently down 1.9% at $34.99 a troy ounce.
Following this week's wild swings, analysts are closely watching readings on physical demand for precious metals. Demand for gold bullion, especially from China and India, the world's top two gold consumers, has helped cushion price declines after similar drops in prices during the last year.
"At these price levels we've seen an interest in the physical market pick up, particularly from Asian buyers," said Marc Ground, an analyst with Standard Bank, in a note.
Some analysts say gold may recover and head toward record highs this year, as investors buy the metal to shield their wealth from easy-money policies still being deployed by central banks in Europe and the U.S. The precious metal peaked in September above $1,900 an ounce.
"The monetary and physical supply (and) demand fundamentals point to a very hefty upside in the second half of the year," Bart Melek, an analyst with TD Securities, said in a note. "We continue to see gold at over $2,000/oz late in the year."
