Gold Declines as an Advance to Two-Month High Spurs Selling

Aug. 4 (Bloomberg) -- Gold declined on speculation that the metal’s rise to an almost two-month high may cause investors to sell some of their holdings.

Bullion, which touched $962.51 an ounce yesterday, the highest since June 10, snapped a three-day gain as the dollar rebounded against a basket of six major currencies from a 10- month low. A stronger U.S. currency saps demand for commodities priced in dollars.

“Gold is facing strong resistance near $960,” said Chris Yu, head of trading with Samsung Futures Co. in Seoul. “It may be in for some consolidation before physical demand for the metal arises to support prices.”

Gold for immediate delivery fell 0.2 percent to $954.60 an ounce at 2:20 p.m. in Singapore. Bullion is up 8.2 percent this year. Dollar Index added 0.1 percent to 77.71 after a 1 percent decline yesterday and the MSCI Asia Pacific Index of regional shares rose for a fourth day.

Against the backdrop of weak physical demand, firming equities and low inflation, the gold price is “too high” and may undergo a correction in the medium term, Eugen Weinberg and other analysts with Commerzbank AG wrote in a note yesterday.

Meanwhile, Sino Gold Mining Ltd., owner of China’s second- largest gold mine, plans to double production of the precious metal by 2012, Chief Operating Officer Cobb Johnstone said yesterday at a conference in Kalgoorlie, Western Australia.

The Eastern Dragon mine, to start in late 2010, will produce an average of 90,000 ounces a year at a cost of $125 per ounce for at least five years, Cobb said. He didn’t say what the targeted output was, or the comparison for the doubling projection.

Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged at 1,072.87 metric tons as of Aug. 3, according to data on the company’s Web site.

Among other precious, silver was down 0.4 percent at $14.26 an ounce, platinum declined 0.2 percent to $1,233.50 an ounce and palladium rose 0.3 percent to $273.25.