Gold Falls From Record in London as Stronger Dollar Spurs Sales

By Nicholas Larkin and Glenys Sim

Nov. 19 (Bloomberg) -- Gold fell for the first time in five days in London as a stronger dollar curbed the metal’s appeal as an alternative investment, spurring sales of bullion after its rally to a record.

The dollar gained as much as 0.8 percent against the euro today. Gold, which typically moves inversely to the greenback, reached an all-time high of $1,152.85 an ounce yesterday. The metal has climbed 29 percent this year as the U.S. currency has dropped 5.9 percent against the euro.

“We’re down on the back of the stronger dollar,” Afshin Nabavi, a senior vice president at bullion refiner MKS Finance SA in Geneva, said today by phone. “We’ve seen a little profit- taking. The market got a bit too bullish, too early.”

Gold for immediate delivery slid $8.97, or 0.8 percent, to $1,136.53 an ounce by 9:47 a.m. local time. Gold futures for December delivery on the New York Mercantile Exchange’s Comex division lost 0.4 percent to $1,136.50 an ounce.

The “long-term trend of gold is on the upside,” Bob Takai, general manager of financial services at Japanese trading company Sumitomo Corp., said in a Bloomberg Television interview today. “I worry a little bit about the speed of the price rise for the past two, three months, so I think there is going to be a quick pullback in the near future.”

Stronger Demand

The rally has pushed spot gold’s 14-day relative strength index, a gauge of whether a commodity or security is overbought or oversold, above the level of 70 viewed by some investors and analysts who follow technical charts as signaling a decline. Today’s reading for immediate-delivery gold was 70.67.

Gold demand climbed 10 percent in the third quarter from the previous three months after investors bought the metal as a currency hedge and jewelry purchases picked up, the World Gold Council said today.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, rose 3.66 metric tons to 1,117.49 tons yesterday, the first gain since Nov. 9. Investments in ETFs backed by gold surged 68 percent this year through September as the financial crisis wracked the global economy and the sliding dollar ignited inflation concern, the council said yesterday.

“There are plenty of cheap dollars around,” Takai said. “Gold is now chosen by investors as a target investment” as a result of this “excessive liquidity,” he said.

Among other precious metals for immediate delivery in London, silver slid 1.8 percent to $18.23 an ounce. Platinum fell 0.8 percent to $1,431 an ounce, while palladium was 1.7 percent lower at $364.25 an ounce.

Platinum held in ETF Securities Ltd.’s exchange-traded products rose 0.7 percent to a record 422,527 ounces yesterday, according to the company’s Web site. Palladium holdings increased 0.7 percent to a record 595,258 ounce.

To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net