Gold Drops to 1-Month Low as Dollar Extends Rally Against Euro

By Millie Munshi

July 30 (Bloomberg) -- Gold fell to a one-month low as the dollar extended its rally, eroding demand for the precious metal as an alternative investment. Silver also gained.

The U.S. currency gained as much as 0.3 percent against the euro, touching the highest price since June 25. The dollar has gained 3 percent since reaching a record low almost two weeks ago. Some traders buy gold to preserve purchasing power when the dollar drops. Before today, gold had fallen 10 percent from a record in March as investment demand waned.


Gold's move today ``is a knee-jerk reaction to the stronger dollar,'' said Patrick Chidley, an analyst at Barnard Jacobs Mellet in Stamford, Connecticut.

Gold futures for December delivery fell $14.40, or 1.5 percent, to $912 an ounce at 9:15 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would be the biggest drop on a most-active contract since July 23. Gold earlier touched $9.09, the lowest for a most-active contract since June 26.

The precious metal often moves in the opposite direction of the U.S. currency. The metal reached a record $1,033.90 an ounce in March as the dollar headed to an all-time low of $1.6038 per euro on July 15. Euros sold for as little as $1.5547 each today.

Silver futures for September delivery fell 28.5 cents, or 1.6 percent, to $17.09 an ounce on the Comex. Before today, the metal had gained 16 percent this year.

To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net