Gold Falls in London as Dollar Strengthens, Crude Oil Declines

By Chanyaporn Chanjaroen

Dec. 1 (Bloomberg) -- Gold fell for the first time in three trading sessions in London as the dollar strengthened and crude oil declined, diminishing the appeal of the metal as a hedge against weakness in the U.S. currency. Platinum also plunged.

The dollar index, measuring the currency against six counterparts, rose for a second consecutive session. The relationship between gold and the euro-dollar exchange rate has strengthened this year, with a correlation of 0.6, compared with 0.53 a year earlier. A reading of 1 would mean they move in lockstep. Oil fell after OPEC deferred a decision on output.

Gold for immediate delivery dropped $25.62, or 3.1 percent, to $792.43 an ounce as of midday in London. The metal advanced 13 percent in November, the most since 1999. February futures fell $25.50, or 3.1 percent, to $793.50 in electronic trading on the Comex division of the New York Mercantile Exchange.

“The dollar appreciation weighed down on gold,” said Bayram Dincer, a commodity analyst at Dresdner Bank AG in Zurich. “It also traded in relation to the crude-oil news over the weekend as investors liquidated positions in oil and gold together.”

Gold fell to $795.50 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $814.50 at the previous afternoon fixing.

Hedge-fund managers and other large speculators increased their net-long positions in New York gold futures in the week ended Nov. 18, according to U.S. Commodity Futures Trading Commission data. Speculative long positions, or bets prices will rise, outnumbered short positions by 64,829 contracts on Comex. Net-long positions rose by 870 contracts, or 1 percent, from a week earlier.

Gold ETF

Gold in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, was unchanged at 758.12 metric tons, according to data on the company’s Web site. The fund was at a record 770.64 tons on Oct. 13, overtaking Japan as the world’s seventh-largest holder of gold.

Among other metals for immediate delivery, silver fell 3.6 percent to $9.9338 an ounce. Platinum lost $65.75, or 7.5 percent, to $815.75 and palladium was $8.50, or 4.5 percent, lower at $182.

Platinum has declined 46 percent this year as car makers, the biggest users of the metal, cut production of vehicles.

Toyota Motor Corp. and Nissan Motor Co. led the biggest drop in Japan’s auto sales in 34 years as the country’s recession and wage cuts damped demand.

Sales of cars, trucks and buses, excluding minicars, fell 27 percent to 215,783 in November, the Japan Automobile Dealers Association said in a statement today. Sales dropped 28 percent at Toyota, Japan’s largest automaker, and 30 percent at Nissan. Domestic sales for South Korea’s five automakers dropped to the lowest in more than three years.

Automakers account for more than half of global platinum consumption, according to estimates by Johnson Matthey Plc, a London-based metals refiner, trader and researcher. The figures take recycling into account.

To contact the reporter on this story Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net