Gold May Decline as Dollar’s Advance Reduces Investment Demand

Oct. 28 (Bloomberg) -- Gold, little changed in Asia, may decline on speculation that the dollar will extend gains against major currencies, reducing demand for the precious metal.

The dollar may rise versus the euro for a fourth day, the longest stretch of gains since August, after consumer confidence fell this month in the U.S. and before a report forecast to show German unemployment rose. Gold, which often moves inversely to the U.S. currency, has dropped 3 percent since touching an all- time high of $1,070.80 an ounce on Oct. 14.

“The gold market is still very much reflecting developments in the U.S. dollar,” said Toby Hassall, an analyst with CWA Global Markets Pty Ltd. in Sydney. Any drop in bullion is “certainly reaction to a bounce in the U.S. dollar.”

Gold for immediate delivery traded at $1,038.50 at 1:20 p.m. in Singapore compared with yesterday’s close of $1,040.05. The precious metal has risen 18 percent this year. The dollar traded at $1.4809 per euro in Tokyo from $1.4804 yesterday in New York.

Hedge funds and other large speculators trimmed net-long positions in gold futures by 2 percent as of Oct. 20 from a record the previous week, and miners, producers and commercial users increased their net-short position, Commodity Futures Trading Commission data show. A net-long position benefits when prices rise, while net-shorts gain from a decline.

Still, Jon Nadler, analyst with Kitco Metals Inc., wrote in an Oct. 26 report that the level of speculative long positions remained worrisome, posing the risk of an “opening-of the- floodgates type of liquidation” should prices extend a drop.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, fell 1.22 metric tons to 1,106.87 tons as of Oct. 26. The holding reached a record of 1,134 tons on June 1.

Among other precious metals, silver fell 0.2 percent to $16.66 an ounce, platinum added 0.2 percent to $1,317.50 an ounce and palladium rose 0.6 percent to $330.25 an ounce.