Gold Declines as Stronger Dollar Curbs Demand for Alternative Investment

Gold declined in London as a stronger dollar curbed demand for the precious metal as an alternative investment.
The dollar gained against six major currencies as European Union officials failed to agree on a second Greek rescue plan. Bullion typically moves counter to the greenback. China yesterday ordered lenders to set aside more cash as reserves after inflation accelerated to the fastest pace in almost three years.
“Precious metals have come under pressure as a result of the firmer dollar,” James Moore, an analyst at TheBullionDesk.com in London, said today in a report. Still, “rising inflation indicators, ongoing debt issues and the increasing risk of default by Greece will likely limit downside pressure, with investors to view corrections as buying opportunities.”
Immediate-delivery gold fell $5.03, or 0.3 percent, to $1,518.75 an ounce by 11:22 a.m. in London. Gold for August delivery was down 0.3 percent at $1,519.60 an ounce on the Comex in New York.
Bullion rose to $1,517.75 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,516 at yesterday’s afternoon fixing.
EU finance ministers yesterday agreed to convene again on June 19 after they failed to reconcile a German-led push for bondholders to share part of the cost of a new Greek aid plan. European Central Bank warnings were backed by France that the move might constitute the region’s first sovereign default.

Rescue for Greece

German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet on June 17 in Berlin, with pressure mounting for the leaders to resolve their differences over a rescue for Greece, which was downgraded this week to the world’s lowest credit rating by Standard & Poor’s.
Gold is up 6.9 percent in 2011 after climbing the past 10 years, the longest run of gains in at least nine decades. Europe’s debt crisis helped bullion reach a record $1,577.57 on May 2. Bullion may extend its rally as demand surges from emerging markets including China and India, according to the producer-funded World Gold Council.
“There’s a tidal wave of gold demand coming,” Jason Toussaint, the council’s managing director of U.S. and investment, said yesterday at the Bloomberg Link Money Managers Conference in Boston. “A key is the long-term fundamental change in emerging markets. The biggest markets of growth are China and India.”

Silver Falls

Silver for immediate delivery fell 0.8 percent to $35.12 an ounce in London. The metal reached a record $49.79 on April 25. Silver held in exchange-traded products dropped 197.1 metric tons to 13,605.1 tons yesterday, the lowest level since September, data compiled by Bloomberg show.
“A 10 percent downside correction now looks more likely than a 10 percent rebound,” Edel Tully, a London-based analyst at UBS AG, said in a report. “While we think another shot at $50 is very possible later this year, for now the risk-reward doesn’t seem worth it.”
Palladium declined 0.7 percent to $788.50 an ounce. Platinum was down 0.4 percent at $1,785.40 an ounce.(source: bloomberg)