Gold Declines for Third Day as Dollar Strengthens; Silver Drops

By Rachel Graham

Aug. 26 (Bloomberg) -- Gold declined in London for a third day as the dollar strengthened, diminishing demand for the metal as an alternative investment.

The dollar rose for a third trading day against the euro, extending its gain against the euro to 6 percent this month. Gold has fallen 10 percent this month. Crude oil traded 22 percent below its July 11 record of $147.27 a barrel on the New York Mercantile Exchange, curbing the metal's appeal as a hedge against inflation.

``Gold is likely to go below $800 in the next few days,'' Liran Kapeluto, a senior dealer at trading-system operator Finotec Trading U.K. Ltd., said by phone from London. ``The assumption is that crude will go down and the dollar will remain stable.''

Gold for immediate delivery fell $4.44, or 0.5 percent, to $817.51 an ounce as of 9 a.m. in London. Futures for December declined $2.70, or 0.3 percent, to $823 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

Hedge-fund managers and other large speculators decreased their net-long position in New York gold futures in the week ended Aug. 19, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 112,366 contracts on the Comex division of the New York Mercantile Exchange, the Washington- based commission said in its Commitments of Traders report on August 22. Net-long positions fell by 18,294 contracts, or 14 percent, from a week earlier.

Among other metals for immediate delivery, silver declined 5.5 cents, or 0.4 percent, to $13.44 an ounce. Platinum gained $6.65, or 0.5 percent, to $1,439.65 an ounce and palladium gained $5.75, or 2 percent, to $294 an ounce in London.

To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net