Gold Falls as Dollar Gain Curbs Demand for Alternative Asset

June 23 (Bloomberg) -- Gold futures fell to a one-week low on speculation the dollar’s rally will erode demand for the precious metal as an alternative asset.

The greenback headed for the fourth straight gain against a basket of six major currencies. Before today, gold rose 13 percent this year, reaching a record $1,266.50 an ounce on June 21, on demand for a haven amid Europe’s sovereign-debt woes.

“Now that the euro has stabilized, the focus is back on the dollar-and-gold relationship,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “There’s just not enough fear and panic to send gold flying. There’s a little disappointment among recent longs that gold is just backing and filling, instead of advancing after making an all-time high.”

Gold futures for delivery in August dropped $6, or 0.5 percent, to $1,234.80 on the Comex in New York. Earlier, the metal touched $1,225.20, the lowest level for a most-active contract since June 15.

Gold has historically moved inversely to the dollar. This year, the metal climbed to records in euros, U.K. pound and Swiss francs.

Before today, the euro climbed 3.3 percent from a four-year low on June 7.

“It is becoming apparent that at least some of the aggressiveness among speculators as regards to pouncing upon the euro and piling further into bullion is on the decline,” said Jon Nadler, a senior analyst at Kitco Inc. in Montreal.

Silver futures for July delivery dropped 44.3 cents, or 2.3 percent, to $18.504 an ounce, the biggest drop since June 4.

Platinum futures for October delivery fell $27.40, or 1.7 percent, to $1,574.70 an ounce on the New York Mercantile Exchange, the largest decline in four weeks.

Palladium futures for September delivery tumbled $15.60, or 3.2 percent, to $474.35 an ounce.