Gold Trades at Lowest in More Than Two Weeks on Oil, Dollar

By Feiwen Rong

July 24 (Bloomberg) -- Gold traded at its lowest in more than two weeks in Asia after the U.S. dollar rallied to a two- week high against the euro and crude oil extended losses, paring demand for the metal as hedge against inflation.

Gold dropped as oil traded as low as $123.89 a barrel, a 16 percent decline from the July 11 record. The dollar climbed for a second session against the euro. Gold has climbed 10 percent this year while oil has jumped 29 percent and the dollar has fallen 7 percent against the euro.

``Oil is taking the lead these days, gold, dollar and equities are just following,'' Peter Tse, chief precious metals trader at Scotia Mocatta, the bullion arm of the Bank of Nova Scotia, said by phone from Hong Kong today.

Bullion for immediate delivery was little changed at $921.40 at 10:59 a.m. in Singapore after falling to $917.10 an ounce, the lowest since July 9. Silver fell 0.4 percent to $17.2875 an ounce.

Crude oil was little changed at $124.41 a barrel at 10:40 a.m. in Singapore. The dollar last traded at $1.5693 per euro, after earlier touching $1.5670, the highest since July 9.

``After the support at $940 an ounce was broken last night, the next key support will be at $910,'' Tse said. ``The bullion will continue to trade in a very volatile fashion.''

Long Positions

Tse said market is expected to see a ``substantial reduction'' in the open interest in gold futures traded in New York as gold made failed bid to overcome $1,000 hurdle last week.

``We heard open interests have been substantially reduced over the last few sessions, so it'll be interesting to see the CFTC report this Friday,'' he added.

Hedge-fund managers and other large speculators increased their net-long position in New York gold futures in the week ended July 15, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 202,783 contracts on the Comex division of the New York Mercantile Exchange, the CFTC report said.

August-delivery gold was little changed at $921.30 an ounce in after-hours electronic trading on Comex at 10:55 a.m. in Singapore, while gold for December delivery traded in Shanghai fell 2.3 percent to 203.10 yuan a gram ($925 an ounce).

Gold for June 2009 delivery fell 1.9 percent to 3,214 yen a gram ($928 an ounce) on the Tokyo Commodity Exchange at the 11:00 a.m. local time break.

To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net