Gold Trades Below $800 on Concern Dollar Will Extend Gains

By Feiwen Rong

Aug. 19 (Bloomberg) -- Gold fell to below $800 an ounce in Asia amid concern the dollar may gain further, eroding the precious metal's appeal as an alternative asset. Silver also fell.

A more than 7 percent rally in the dollar index since mid- July drove gold to its lowest for almost 10 months on Aug. 15 and spurred the biggest daily decline in silver for two years. The dollar was little changed against the euro and yen before government reports of housing starts and inflation.

``Many analysts are talking about the prospect of a further strengthening in gold prices, but it's clear that the precious metal is susceptible to further downward moves if the dollar resumes its upward trend,'' Darren Heathcote, head of trading at Investec Bank Ltd., said today in a report.

Gold for immediate delivery fell by as much as $9.92, or 1.2 percent, to $790.15 an ounce before trading at $791.53 at 9 a.m. in Singapore. The metal dropped as low as $772.98 Aug. 15, the lowest since October. Silver for immediate delivery fell 0.7 percent to $12.97 an ounce.

The dollar traded at $1.4682 per euro at 9:01 a.m. in Singapore, from $1.4694 late yesterday in New York. The dollar was at 109.91 yen from 110.13 yen.

U.S. housing starts probably dropped 9.9 percent to an annual rate of 960,000 in July, the fewest in 17 years, according to a Bloomberg News survey ahead of the Commerce Department report today. The Labor Department will also report the producer price index climbed 0.6 percent in July after jumping 1.8 percent in June, a separate survey showed.

Longs Fall

Hedge-fund managers and other large speculators decreased their net-long positions in New York gold futures by 20 percent in the week ended Aug. 12, according to U.S. Commodity Futures Trading Commission data.

Net-long positions fell by 33,068 contracts from a week earlier, the Washington-based commission said Aug. 15 in its Commitments of Traders report. Still, speculative long positions, or bets prices will rise, outnumbered short positions by 130,660 contracts on the Comex division of the New York Mercantile Exchange, the report said.

Gold for December delivery was down 1.1 percent at $796.50 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at 8:58 a.m. in Singapore.

Bullion for December delivery on the Shanghai Futures Exchange fell 0.8 percent to 178.28 yuan a gram ($806 an ounce).

In Japan, gold for June delivery on the Tokyo Commodity Exchange declined 0.9 percent to 2,808 yen a gram ($795 an ounce) at 10:26 a.m. local time.

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