Bloomberg News

Gold Drops, Halts Longest Rally Since October, as Dollar Climbs

January 07, 2012

Jan. 6 (Bloomberg) -- Gold futures fell, ending the longest rally in 10 weeks, as the dollar’s surge eroded demand for the precious metal as an alternative asset.

The greenback rose to a one-year high against a basket of major currencies as the U.S. jobless rate unexpectedly fell and a report showed European confidence in the economic outlook dropped to a two-year low. In the fourth quarter, the dollar gauge gained 2.1 percent, while gold dropped 3.4 percent.

“People are leaning toward the dollar because of Europe,” Fain Shaffer, the president of Infinity Trading Corp. in Medford, Oregon, said in a telephone interview. “Solid numbers out of the U.S. helped the dollar gain further.”

Gold futures for February delivery fell 0.2 percent to settle at $1,616.80 an ounce at 1:43 p.m. on the Comex in New York. The price climbed in the previous four days, the longest rally since late October.

Earlier, the metal reached $1,632.30, the highest since Dec. 21, as Europe’s sovereign-debt crisis and escalating tensions surrounding Iran’s nuclear program boosted demand for a haven. This week, gold gained 3.2 percent, the most since early December.

The metal may climb as much as 26 percent this year and average $1,766, according to a London Bullion Market Association survey of traders and analysts.

“We think gold is bottoming so it should gradually trade higher,” said Jesper Dannesboe, a strategist at Societe Generale SA in London.

Silver futures for March delivery declined 2.1 percent to $28.683 an ounce on the Comex. This week, the metal climbed 2.8 percent, halting a slump since early December.

On the New York Mercantile Exchange, palladium futures for March delivery fell 4.7 percent to $614 an ounce, the biggest drop since Dec. 14. Platinum futures for April delivery declined 0.7 percent to $1,408.20 an ounce.

--With assistance from Maria Kolesnikova in London. Editors: Patrick McKiernan, Daniel Enoch

To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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