Gold Declines in New York on Stronger Dollar, Falling Equities

Jan. 27 (Bloomberg) -- Gold fell in New York for the first time in three sessions as a rally by the dollar curbed the metal’s appeal as an alternative asset and some investors sold bullion to cover losses in equity markets.

The dollar rose as much as 0.3 percent against a basket of six major currencies while European and Asian stocks declined on mounting concern that China and the U.S. will accelerate plans to unwind stimulus measures as their economies rebound. Before today, gold rose 21 percent in the past year as the dollar tumbled 7.4 percent.

“Gold is on the defensive because of the dollar,” said Marty McNeill, a trader at R.F. Lafferty Inc. in New York.

Gold futures for April delivery dropped $13.80, or 1.3 percent, to $1,085.70 an ounce on the Comex division of the New York Mercantile Exchange.

The Dow Jones Stoxx 600 Index of European shares closed at the lowest level in more than a month. It has slid 2.6 percent this year as the U.S. called for limits on risk-taking by banks and China moved to restrict lending and cool economic growth.

“If stocks continue to fall, people may have to liquidate their gold positions,” said Bernard Sin, the head of currency and metals trading at bullion refiner MKS Finance SA in Geneva.

Gold gained for a ninth year in 2009 as the Federal Reserve maintained interest rates near zero percent to revive growth, driving the dollar lower. The Fed will keep its key overnight rate unchanged today as officials conclude a regular monetary- policy meeting, according to all 93 economists surveyed by Bloomberg.

Gold will rebound, approaching $1,300 in the next six months, on increased investment demand, Investec Global Gold Fund said in a report. The “long-term floor” will be $1,000, Investec said.

Silver futures for March delivery fell 42 cents, or 2.5 percent, to $16.44 an ounce. Platinum futures for April delivery declined $39.20, or 2.6 percent, to $1,492.10 an ounce. Palladium for March delivery slid $10.80, or 2.5 percent, to $416.75 an ounce.