Gold Falls From Two-Month High as Dollar Climbs; Silver Drops

Aug. 6 (Bloomberg) -- Gold fell from a two-month high as the dollar rose, cutting demand for the precious metal as an alternative investment. Silver declined.

The U.S. Dollar Index, a six-currency gauge of the greenback’s value, advanced after a government report showed the number of U.S. workers making initial claims for jobless benefits fell more than economists estimated, a sign that some employers have stopped trimming jobs as the recession ebbs. Bullion typically falls when the dollar strengthens.

“The firmer dollar is putting slight pressure on gold,” said Ralph Preston, a Heritage West Futures Inc. analyst in San Diego. “Gold’s direction will be all about the dollar and where it goes from here.

Gold futures for December delivery slid $3.40, or 0.4 percent, to $962.90 an ounce on the New York Mercantile Exchange’s Comex division. Earlier, the most-active contract reached $974.30, the highest since June 5.

Bullion for immediate delivery slipped $2.26, or 0.2 percent, to $961.20 an ounce at 6:55 p.m. in London. Earlier, the price advanced to $971.68 an ounce, the highest since June 5.

Silver for September delivery dropped 11.5 cents, or 0.8 percent, to $14.645 in New York. Earlier, the metal surged to $15.035, the highest since June 12.

“Gold is bullish, and only a close under $945 an ounce hints at a turn to lower prices,” Preston said. “A close over $970 should accelerate rallies” and prices may reach $993, he said.

Spot Price

The metal rose to $964 in the London afternoon “fixing,” the price used by some mining companies to sell their output, from $960.75 in the morning fixing. Spot prices are heading for a fourth consecutive weekly gain.

The dollar index climbed as much as 0.8 percent.

“Gold prices continue to track the dollar as longer-term investment buying takes a back seat for now,” Natalya Naqvi, a Barclays Capital analyst, said today in a report.

In the gold market, pressure also comes “from signs of exhaustion in risk appetite and from weak fundamentals,” Tom Pawlicki, an MF Global Inc. analyst in Chicago, said in a note.

HSBC Securities raised its forecast of average gold prices for this year by 5.7 percent to $925 an ounce.

“Strong investor demand, potentially volatile commodity prices, weak jewelry demand, sluggish mine output and heavy scrap sales” will keep gold in a wide and volatile range, James Steel, a New York-based analyst, said yesterday in a report.

“Gold’s safe-haven properties are not its only attraction,” Nick Moore and other RBS Global Banking & Markets analysts said today in a report. “The desire to hold more diversified assets will remain a key driver, supporting investment demand.”