Gold Declines to Eight-Week Low in Asia on Dollar's Strength

By Glenys Sim

Aug. 8 (Bloomberg) -- Gold dropped to an eight-week low in Asia, heading for a fourth weekly decline, as energy costs fell and the dollar rallied, reducing the precious metal's appeal as a haven investment.

Bullion has lost 4.7 percent this week as the dollar gained 2 percent against the euro and 1.6 percent against the yen, while oil prices tumbled 4.6 percent.

``The dollar is the main reason for gold weakness,'' Ronald Leung, director, Lee Cheong Gold Dealers (Hong Kong) Ltd. , said today by phone from Hong Kong. ``I think $850 is just a matter of time if the dollar continues to go up.''

Bullion for immediate delivery fell as much as $6.30, or 0.7 percent, to $866.75 an ounce, the lowest since June 13 and traded at $867.09 at 9:02 a.m. in Singapore. Silver for immediate delivery was down 0.3 percent at $16.15 an ounce.

The dollar headed for its fourth weekly gain against the euro after European Central Bank President Jean-Claude Trichet said risks to economic growth are ``materializing,'' reducing expectations interest rates will be lifted. The dollar also headed for its biggest weekly gain against the yen in two months.

The dollar was at $1.5247 against the euro compared with $1.5325 yesterday in New York.

Crude Oil for September delivery on the New York Mercantile Exchange was down 49 cents at $119.79 a barrel, down 19 percent from its record of $147.27 on July 11.

Gold for December delivery fell 0.2 percent to $875.90 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

Gold for June delivery on the Tokyo Commodity Exchange was 1.3 percent lower at 3,081 yen a gram ($875 an ounce).

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net