Gold Declines as Dollar Rebounds, Rally to Record Spurs Sales

Oct. 22 (Bloomberg) -- Gold fell for the first time in a week as a rebounding dollar eroded the appeal of the precious metal as an alternative investment.

The U.S. Dollar Index, which measures the greenback against six currencies, rose as much as 0.7 percent from a 14-month low yesterday. Gold reached a record $1,072 an ounce on Oct. 14.

“A stronger U.S. dollar shall unleash strong gold sellers,” said Dennis Gartman, an economist in Suffolk, Virginia, and the editor of the Gartman Letter.

Gold futures for December delivery fell $5.90, or 0.6 percent, to $1,058.60 an ounce on the New York Mercantile Exchange’s Comex division, the first loss since Oct. 15.

Gold typically moves in the opposite direction of the dollar. The most-active futures have climbed 20 percent this year while the dollar index is down 7.6 percent.

Yesterday, the euro topped $1.50 for the first time since August 2008. The European currency will trade at $1.50 at year- end, according to the median forecast of 48 analysts in a Bloomberg survey. The dollar tumbled to $1.6038 per euro on July 15, 2008, the weakest since the 16-nation currency’s 1999 debut.

Gold may be too expensive for some investors, analysts said. Bullion held in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, fell 1.22 metric tons to 1,108.09 tons as of yesterday, the first decline since Oct. 7, according to the company’s Web site. The fund’s holdings reached an all-time high of 1,134 tons on June 1.

India Imports Decline

Gold imports in India, the world’s biggest consumer, will be about 50 tons in the fourth quarter, compared with a quarterly average of 100 to 120 tons, Anjani Sinha, the Indian Bullion Market Association president, said today in an interview. High prices have hurt demand, he said.

Sales in India typically reach their highest level during the Hindu festival of Diwali, which occurred on Oct. 17, and in the wedding season that follows. A rebound in demand will be “very difficult” unless the price declines to $950 or less, Sinha said.

Silver futures for December delivery dropped 28 cents, or 1.6 percent, to $17.545 an ounce in New York. Platinum for January delivery fell $4.50, or 0.3 percent, to $1,369.90 an ounce, while palladium for December delivery sank $1.75, or 0.5 percent, to $339.75 an ounce.