Gold Falls as Rallying Dollar Cuts Investor Demand for Metals

Jan. 15 (Bloomberg) -- Gold prices fell as the dollar’s rally sapped investor demand for the metal as an alternative asset. Palladium jumped to an 18-month high.

The greenback gained as much as 0.8 percent against a basket of six major currencies, halting a five-session slide. Demand for the dollar as a haven increased amid speculation that China’s economy will cool following central bank steps to tighten credit. Gold has climbed 40 percent in 12 months as the dollar declined 8.5 percent.

“It’s the dollar move driving prices,” said Afshin Nabavi, a senior vice president at MKS Finance SA, a bullion refiner in Geneva.

Gold futures for February delivery fell $12.50, or 1.1 percent, to $1,130.50 an ounce on the Comex division of the New York Mercantile Exchange, capping a 0.7 percent decline this week. The metal tumbled 7.3 percent last month after reaching a record $1,227.50 on Dec. 3.

Bullion held by the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, fell 2.13 metric tons to 1,113.75 tons as of yesterday.

Gold may gain next week as investors seek an alternative to the dollar, a Bloomberg News survey showed. Of 19 traders, investors and analysts surveyed, 12, or 63 percent, said the metal would rise. Five forecast a decline and two were neutral.

Silver, Platinum

Among other precious metals, silver futures for March delivery fell 22.8 cents, or 1.2 percent, to $18.427 an ounce in New York. For the week, the metal slipped 0.2 percent.

Platinum for April delivery fell $8.70, or 0.5 percent, to $1,596.10 an ounce. The price gained 1.6 percent this week.

Palladium futures for March delivery rose $4.70, or 1.1 percent, to $447.75 an ounce. Earlier, the most-active contract reached $454, the highest price since July 15, 2008. The metal climbed 5.3 percent this week.

Exane BNP Paribas raised its 2010 estimate for palladium to $400, up 57 percent, and forecast platinum at $1,550, a 22 percent increase from a previous projection. In a report today, the bank cited “better supply-demand balances.”

The ETFS Platinum Trust and ETFS Palladium Trust started trading in New York on Jan. 8, offering shares backed by metal. The ETFs may deepen shortages in global supplies, analysts said.

“Platinum and palladium should continue to respond to inflows of investment to the new ETFs,” said Tom Pawlicki, an MF Global Ltd. analyst in Chicago.