Gold Nears Three-Week Low in Asia on Dollar's Gain, Oil Decline

By Glenys Sim and Iris Leung

July 30 (Bloomberg) -- Gold traded near a three-week low in Asia as a stronger dollar and falling energy costs eroded demand for bullion as an inflation haven.

Dollar-denominated gold tends to move in the opposite direction to the U.S. currency. Bullion has fallen 0.8 percent this month as the dollar gained 1 percent against the euro and 1.7 percent against the yen. Crude oil futures fell 2 percent to their lowest close in 12 weeks yesterday.

``The market is struggling for direction,'' Gerard Burg, energy and minerals economist at National Australia Bank Ltd., said by phone from Melbourne today. Retreating crude oil prices damped the ``inflation prospect and this is negative for gold.''

Bullion for immediate delivery fell as much as 0.4 percent to $915.59 an ounce, and traded at $918.15 at 10:35 a.m. in Singapore. Gold dropped to $914.33 an ounce yesterday, the lowest since July 8. Silver for immediate delivery fell 0.3 percent to $17.32 an ounce at the same time.

The dollar traded near a one-month high against the euro as an increase in U.S. consumer confidence reduced concern the economy may fall into a recession. The dollar was last at $1.5597 against the euro, compared with $1.5588 late yesterday in New York. It was at 107.99 yen from 108.11 yen.

The U.S. currency strengthened yesterday as oil prices extended their decline the past month and the country's equity markets rebounded.

Gold for June delivery on the Tokyo Commodity Exchange lost 26 yen to 3,215 yen a gram ($926 an ounce) at the 11 a.m. local Time break.

Gold for December delivery on the Comex division of the New York Mercantile Exchange was little changed at $927.10 an ounce in after-hours electronic trading.

Gold for December delivery on the Shanghai Futures Exchange fell 1.5 percent to 202.15 yuan a gram ($920 an ounce).

To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Iris Leung in Hong Kong at Ileung7@bloomberg.net