Gold Futures Decline as Dollar Rebounds; Silver Prices Gain

Aug. 24 (Bloomberg) -- Gold declined the most in a week as the dollar climbed, eroding the metal’s appeal as an alternative investment. Silver futures gained.

The greenback rose against a basket of six major currencies, halting a four-session slide. Gold gained 0.6 percent last week, while the dollar declined 1.1 percent.

“The market is likely to retreat toward $925 to $930 an ounce, provided the dollar rebounds from current lows,” Andrey Kryuchenkov, a VTB Capital analyst in London, said in a note.

Gold futures for December delivery slipped $11, or 1.2 percent, to $943.70 an ounce on the Comex division of the New York Mercantile Exchange. The drop was the biggest since Aug. 17.

Bullion for immediate delivery fell $10.72, or 1.1 percent, to $943.13 at 2:43 p.m. New York time.

“Considerable volatility has marked the gold price in August, shifting between almost $970 and $930 in the space of a few days,” BNP Paribas SA said in a report. “This volatility is mostly dollar-driven, with the currency markets undecided between a dollar collapse and a dollar revival. Physical demand remains weak.”

Hedge-fund managers and other large speculators reduced their net-long position in New York gold futures by 6.6 percent in the week ended Aug. 18, according to U.S. Commodity Futures Trading Commission data. Speculative long positions, or bets that prices will rise, outnumbered short positions by 177,530 contracts.

“Unless the gold market receives fresh news on the bullish front, the risk of easing back toward $925 remains reasonably present,” Jon Nadler, a senior analyst at Kitco Inc. in Montreal, said in a note.

Gold ETF

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, rose 0.92 metric ton to 1,066.41 tons on Aug. 21, the first increase since July 16. The fund reached a record 1,134.03 tons on June 1.

The worldwide economy is pulling out of recession, Federal Reserve Chairman Ben S. Bernanke and European Central Bank President Jean-Claude Trichet said last week at the annual central bankers’ symposium in Jackson Hole, Wyoming.

“Hopes for an improvement in the economy and fears regarding the emergence of inflation are leading to higher commodity prices,” GoldCore Ltd., a brokerage in Dublin, said in a note today.

An economic rebound may buoy prices of silver, which has more industrial uses than gold.

Silver futures for December delivery rose 3.2 cents, or 0.2 percent, to $14.231 an ounce. The metal has gained 26 percent this year, while gold is up 6.7 percent.