Gold Falls to Lowest in a Year as Dollar Gains, Equities Tumble

By Jae Hur and Feiwen Rong

Oct. 23 (Bloomberg) -- Gold declined to the lowest in more than a year as the dollar's gain eroded the metal's appeal as an alternative investment, and stocks fell, prompting investors to cash out of commodities to cover losses.

The dollar has gained 12 percent against the euro this year, while gold has lost 13 percent. Asian stocks slumped, sending the region's benchmark index to the lowest level in four years, as the credit crunch choked worldwide growth.

``Sentiment remained surprisingly weak in precious metal markets'' and ``central bank bailout packages did very little to suppress the panic, with investors appearing to be selling even precious metal positions to fund short-term cash requirements in falling equity markets,'' Natalie Robertson, analyst at ANZ Banking Group Ltd., said in a report today.

Gold for immediate delivery fell as much as 1.4 percent to $719.92 an ounce, the lowest since Sept. 18, 2007, and traded at $726.15 at 1:28 p.m. in Singapore, extending yesterday's 5.3 percent drop. Silver for immediate delivery was down 1.4 percent at $9.42 an ounce after trading as low as $9.36.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, fell to 755.64 metric tons on Oct. 21, down 1.9 percent from a record 770.6 ton Oct. 10.

The MSCI Asia Pacific Index lost 3.1 percent to 85.02 as of 1:32 p.m. in Singapore, after dipping to the lowest level since May 2004. The gauge has plunged 46 percent this year.

Dollar Strength

``The dollar's strength has put pressure on gold prices,'' said Hiroyuki Kikukawa, general manager of research at IDO Securities Co. in Tokyo. ``People are liquidating gold and other commodities as their losses in stock markets deepen.''

``Some people, who deposited stocks for their investment on local gold futures, have been forced to liquidate as the value of their collateral tumbled,'' Kikukawa said.

Asian currencies slumped on concern global growth will slow. The South Korean won slid 3.9 percent to 1,415.77, the Taiwanese dollar lost 0.7 percent to NT$33.37 and the Malaysian ringgit slipped 0.7 percent to 3.5735.

Gold for December delivery fell 1.2 percent to $726.40 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at 12:54 p.m. Singapore time after dipping to $720, matching yesterday's low, the weakest level for a most-active contract since September 2007.

In Japan, the yen's strength against the dollar hurt the appeal of the yen-denominated gold futures. Gold for delivery in August 2009 fell by its 150-yen daily limit to 2,255 yen per gram ($719 an ounce) at 1:54 p.m. local time on the Tokyo Commodity Exchange.

To contact the reporters on this story: Jae Hur in Singapore at jhur1@bloomberg.net; Feiwen Rong in Singapore at frong2@bloomberg.net