Gold Drops as Gain in the Dollar Reduces Demand for Safe Haven

By Jason Scott

June 5 (Bloomberg) -- Gold declined in Asian trading as a gain in the dollar pared demand for the metal as an alternative investment. Silver rose.

Bullion fell as much as 0.3 percent on a recovery in the U.S. currency. The precious metal typically moves in the opposite direction to the dollar.

“Gold is driven by dollar sentiment at the moment,” said Charles Dowsett, director of commodity derivatives at ABN Amro Holding NV in Sydney, said by phone today. “The price is coming off today as the dollar is a little bit stronger.”

The Dollar Index, a six-currency gauge of the greenback’s value, rose as much as 0.2 percent and was trading at 79.389 at 10:48 a.m. in Singapore. The index fell 0.2 percent yesterday.

Gold for immediate delivery declined 0.3 percent to $977.40 an ounce at 10:42 a.m. in Singapore after trading between $976.62 and $983.14. Silver for immediate delivery rose as much as 0.5 percent and was trading up 0.1 percent to $15.9050 an ounce after surging 3.5 percent yesterday.

Silver has outpaced gold this year. An ounce of gold now buys about 61.44 ounces of silver, according to data compiled by Bloomberg. That’s down from a high of 84.4 on Oct. 10, which was the most since March 1995.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged at 1,132.5 metric tons as of yesterday, according to the company’s Web site.

Gold for August delivery, the most-active contract on the Comex division of the New York Mercantile Exchange, declined 0.3 percent to $979.50, after falling as much as 0.4 percent.

“Some medium- to longer-term investment has come in on longer-term inflation fears,” ABN Amro’s Dowsett said. “As governments print more money to spend on stimulus packages, the view is eventually that will push inflation.”

Among other precious metals for immediate delivery, platinum fell 1.3 percent to $1,278.25 an ounce. Palladium, up 4.7 percent yesterday, fell 0.9 percent to $252.75 an ounce.

To contact the reporter on this story: Jason Scott in Perth at Jscott14@bloomberg.net