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Gold Snaps Three-Day Advance As Dollar’s Strength Damps Demand

By on August 8, 2012

Gold dropped for the first time in four days as the metal’s advance to a one-week high encouraged sales and as the dollar’s strength sapped demand for bullion as an alternative investment. Silver declined.

Spot gold lost as much as 0.2 percent to $1,609.15 an ounce, and traded at $1,609.65 at 2:23 p.m. in Singapore. The metal climbed to $1,618.40 yesterday, the highest level since Aug. 1. The dollar rose as much as 0.2 percent versus a six- currency basket, gaining for the first time in four days, before data that may show weakness in German industrial production. Bullion tends to move inversely to the greenback.

“In the last few months, gold prices have slipped as investors have flocked to the traditional safe-haven assets of U.S. Treasuries and the U.S. dollar in lieu of gold as the European debt crisis has intensified,” Lachlan Shaw, an analyst at Commonwealth Bank of Australia (CBA), wrote in an e-mail today. “However, we believe the hopes of central bank stimulus will keep prices firm.”

December-delivery bullion fell 0.1 percent to $1,610.70 an ounce on the Comex in New York. Exchange-traded product holdings were unchanged at 2,403.477 metric tons yesterday, the most since July 19, data compiled by Bloomberg show.

Central banks from the U.S. to China and Europe have eased monetary policy to boost their economies, which have been hurt by the fiscal crisis in the euro zone. The Bank of Korea is set to consider cutting repurchase rates for a second month tomorrow and the Bank of Japan (8301) is meeting today and tomorrow.

Spot silver fell as much as 0.7 percent to $27.94 an ounce, and was at $27.965, dropping for the first time in four days. Cash platinum dropped 0.3 percent to $1,404.25 an ounce, and palladium declined 0.3 percent to $585.22 an ounce.