Nov. 1 (Bloomberg) -- Gold futures fell to a one-week low as worsening prospects for Europe’s debt crisis led to a rally in the dollar, eroding demand for the precious metal as an alternative investment.
The greenback rose as much as 2 percent against a basket of six currencies, the most since December 2008, on speculation that the European Central Bank will cut interest rates to revive a slowing economy and on renewed concern that Greece will default. Gold rose 6.3 percent last month, touching a five-week high on Oct. 28, as the dollar fell 3 percent.
“We are seeing risk-off trade,” Fred Schoenstein, a trader at Heraeus Precious Metals Management in New York, said in a telephone interview. “Investors are piling back into the dollar.”
Gold futures for December delivery retreated 0.8 percent to settle at $1,711.80 an ounce at 1:50 p.m. on the Comex in New York, after earlier dropping to $1,681.20, the lowest since Oct. 25. Today was the third straight decline.
Greece’s Prime Minister George Papandreou pledged to hold a referendum on the European Union’s latest bailout plan for the nation, days before Group of 20 leaders gather Nov. 3-4 for a summit in Cannes, France, to discuss the debt crisis. The call for a referendum and a parliamentary confidence vote raised the prospect of derailing the European bailout effort and pushing Greece into default.
The stronger dollar is canceling out bullish signs of increased purchases of exchange-traded products backed by bullion and “fantastic flows” of cash into gold bars, Ross Norman, the chief executive officer of London bullion brokerage Sharps Pixley Ltd., said today in a report. Holdings in ETPs backed by gold gained 2.6 metric tons to a five-week high of 2,235.9 tons yesterday, data compiled by Bloomberg show.
Silver futures for December delivery slumped 4.7 percent to $32.731 an ounce on the Comex, the biggest decline for a most- active contract since Sept. 23.
On the New York Mercantile Exchange, platinum futures for January delivery slipped 1.6 percent to $1,582 an ounce, dropping for a second straight day.
Palladium futures for December delivery fell 2.5 percent to $635 an ounce, declining 5.2 percent in three straight declines.
--With assistance from Glenys Sim in Singapore. Editors: Daniel Enoch, Steve Stroth.
To contact the reporters on this story: Nicholas Larkin in London at firstname.lastname@example.org; Debarati Roy in New York at email@example.com.
To contact the editor responsible for this story: Steve Stroth at firstname.lastname@example.org