Gold Drops on Speculation Obama Victory May Speed Dollar Gains

By Feiwen Rong

Nov. 5 (Bloomberg) -- Gold declined in Asia on speculation Barack Obama's victory in the U.S. presidential election and Democrat gains in Congress will speed the dollar's recovery against the euro.

The currency climbed against the euro, the British pound and Australian dollar as television networks projected 338 electoral votes for Obama to 156 for Republican rival John McCain, who conceded defeat. The Democrats won four Senate seats from the Republicans. Asian stocks advanced to a three-week high.

``People are anticipating a stronger dollar because they hope Obama will do something on the twin deficits and that he'll handle the financial crisis better than the current administration,'' Wallace Ng, trader at Fortis Bank, said by phone from Hong Kong today.

Bullion for immediate delivery fell as much as 1.6 percent, or $12.10, to $751.15 an ounce today, before trading at $754.88 at 2:07 p.m. in Singapore. Silver for immediate delivery was down 0.2 percent at $10.2050 an ounce.

The outlook for the dollar and gold is still not clear, Anderson Cheung, deputy managing director of precious metals at Mitsui Bussan Precious Metals (HK) Ltd., said from Hong Kong.

``The U.S. dollar is fundamentally weak,'' said Cheung, asking how the election of Obama could make the dollar stronger immediately. The ICE-traded Dollar Index, against six major currencies, rose by 0.5 percent to 85.195 at 1:52 p.m. in Singapore. ``This is all short-term reaction,'' he added.

Gold Demand

Obama has proposed a $175 billion package that includes checks for consumers, a tax credit for job creation and spending on public works such as school repairs, roads and bridges. ``We face an immediate economic emergency that requires urgent action,'' he said in outlining the plan last month.

The prospect of an improved economy may boost gold prices in the long-term, as demand for the precious metal may rise on expanding industrial production and the jewelry sector benefits from rising incomes, Cheung said.

Gold may test $800-$805 after recent volatility. ``Gold went up almost $40 yesterday, now it's down $10 amid profit taking,'' Cheung said. ``It is healthy.''

December-delivery gold was little changed at $757.10 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

Gold for October delivery in Tokyo rallied 4.4 percent at 2,414 yen a gram ($754 an ounce) at 3:00 p.m. local time.

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