Gold Heads for Biggest Weekly Drop Since March on Dollar Rally

By Pham-Duy Nguyen

Aug. 15 (Bloomberg) -- Gold fell, heading for the biggest weekly slide since March, as the dollar surged against the euro, reducing the appeal of the precious metal as an alternative investment. Silver dropped as much as 14 percent.

The dollar is up for the fifth straight week against the euro as economies in Europe slow. Gold generally moves in tandem with the euro as an alternative to the dollar. The metal plunged into a bear market this week, declining as much as 25 percent from the record $1,033.90 an ounce reached on March 17.

``There's just a lot of long liquidation,'' said Joel Crane, a metals strategist at Deutsche Bank AG in New York. ``Commodities are priced in U.S. dollars. There's no getting around that.''

Gold futures for December delivery fell $14.70, or 1.8 percent, $799.80 an ounce at 9:15 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would mark a 7.5 percent drop for the week, the most since March 21.

Earlier, the price touched $777.70, the lowest for a most- active contract since Nov. 20. Gold has fallen every day this month except for a 2.1 percent rally on Aug. 13.

Silver futures for December delivery fell $1.05, or 7.3 percent, to $13.31 an ounce on the Comex, after earlier dropping to $12.305. Before today, silver had declined 3.8 percent this year while gold dropped 2.8 percent.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.