Gold Falls Most in Two Weeks on Dollar Rally; Silver Tumbles

Aug. 17 (Bloomberg) -- Gold fell the most in two weeks as the dollar rallied, curbing bullion’s appeal as an alternative investment. Silver posted the biggest slide in two months.

The dollar rose for the second straight sessions against a basket of six major currencies. Global equities tumbled on concern that the economic recovery will sputter, increasing the allure of the greenback as a haven.

Gold’s decline “is all on the back of the dollar,” said Walter de Wet, an analyst at Standard Bank Ltd. in London. An extended rally by the dollar will drag gold lower, he said.

Gold futures for December delivery slipped $12.90, or 1.4 percent, to $935.80 an ounce on the Comex division of the New York Mercantile Exchange, the biggest drop since July 28. Earlier, the metal touched $931.30, the lowest for a most-active contract since July 30.

Silver futures for September delivery slid 74.7 cents, or 5.1 percent, to $13.975 an ounce, the sharpest decline since June 15. Earlier, the price touched $13.82, the lowest level this month.

Gold for immediate delivery fell $14.45, or 1.5 percent, to $934.10 an ounce at 4:20 p.m. in New York.

“Gold’s inability to hold $944 support in the face of a firmer dollar projects a move back down to $925,” Ralph Preston, a Heritage West Futures Inc. analyst in San Diego, said in an e-mail.

Spot prices have fallen 4.2 percent since reaching a two- month high of $971.68 on Aug. 6.

‘Holding Ground’

“We continue to see the metal holding ground in a broad range between $920 to $965 over the next few weeks with the metal tracking both the dollar and risk sentiment,” James Moore, an analyst at TheBullionDesk.com in London, said in a report.

Crude-oil futures, used by some investors as an inflation gauge, slumped as much as 3.4 percent. Gold is often purchased as a hedge against accelerating consumer prices.

Hedge-fund managers and other large speculators reduced their net-long position in New York gold futures by 1.8 percent in the week ended Aug. 11, according to U.S. Commodity Futures Trading Commission data. Speculative long positions, or bets prices will rise, outnumbered short positions by 190,086 contracts on Comex.

“Even though longer-term investment demand seems to have dried up for the time being, short-term speculative interest remains positive,” Suki Cooper, an analyst at Barclays Capital in London, said in a report.

Thirteen of 27 traders, investors and analysts surveyed by Bloomberg, or 48 percent, said bullion would gain this week. Six forecast lower prices and eight were neutral.

“We’re seeing some guys out of Asia buying physical gold at these levels, which might provide some support,” Standard Bank’s de Wet said. “Some see $940 as a decent level after what gold has done over the past few weeks.”

Platinum futures for October delivery fell 3.1 percent to $1,222.60 an ounce on the Nymex. Palladium futures for September delivery dropped 3.6 percent to $267.40 an ounce.