Bloomberg News

Gold Falls to 3-Week Low as Stronger Dollar Cuts Investor Demand

November 22, 2011

Nov. 21 (Bloomberg) -- Gold fell below $1,700 an ounce in New York to the lowest level in almost three weeks as a stronger dollar curbed demand for the metal as an alternative investment.

The dollar rose against the euro and equities slid amid signs U.S. lawmakers may fail to reach an agreement on budget cuts. Spain’s People’s Party won a parliamentary majority, making the ousted Socialists the fifth European government to be toppled amid the region’s debt crisis. Holdings in exchange- traded products backed by gold climbed to a record.

“We have a firmer dollar, and that is negative for gold,” Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said by phone today. “There might be some small bargain-hunting at these levels, but I’m looking more for the downside in gold than the upside.”

Gold for December delivery slid as much as 2.1 percent to $1,689.10 an ounce, the lowest price since Nov. 1, and was at $1,690.50 by 11:28 a.m. on the Comex in New York. Futures fell 3.5 percent last week. Immediate-delivery gold was 1.9 percent lower at $1,690.43 in London.

Today’s drop took the metal below its 50- and 100-day moving averages. That may push prices toward $1,680 an ounce, James Moore, an analyst at in London, wrote in a report.

The need to “cover losses in other sectors will likely keep gold under pressure in the short term,” Moore wrote.

Record High

Bullion is in the 11th year of a bull market and futures reached a record $1,923.70 an ounce on Sept. 6 as investors sought to diversify away from equities and some currencies. Holdings in gold-backed ETPs climbed 16.5 metric tons on Nov. 18 to an all-time high of 2,339.97 tons, data compiled by Bloomberg show.

Today is the deadline for the U.S. Congressional Budget Office to receive a plan that it can analyze before a so-called supercommittee’s Nov. 23 target date for reaching an agreement on spending cuts. It was highly unlikely that the panel’s talks could be salvaged, a Democratic aide, who requested anonymity, said in an e-mail yesterday.

While physical demand for bullion has weakened since September, Barclays Capital said it remains “positive” on the outlook for the metal, citing stronger investment interest. Prices will average $1,875 this quarter and $2,000 next year, it said in an e-mailed report.

Futures have averaged about $1,705 so far this quarter and $1,562 in 2011, figures compiled by Bloomberg show.

Silver for March delivery dropped 4.2 percent to $31.115 an ounce. Palladium for December delivery was 3.1 percent lower at $586.55 an ounce. Platinum for January delivery fell 2.2 percent to $1,553.50 an ounce.

--With assistance from Phoebe Sedgman in Melbourne and Maria Kolesnikova in London. Editors: Dan Weeks,

To contact the reporter on this story: Nicholas Larkin in London at

To contact the editor responsible for this story: John Deane at

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