Gold Declines in New York as Stronger Dollar Reduces Demand

By Nicholas Larkin

March 4 (Bloomberg) -- Gold declined for the first time in three days in New York as the dollar strengthened and investors sold the metal to lock in recent gains.

Before today, gold futures rose 4.2 percent since Feb. 24 as investors bought the metal as an alternative to holding currency. The dollar rose today against the euro on speculation the European Central Bank will delay withdrawing stimulus measures, damping demand for the region's assets. "If the dollar continues to strengthen, we might see a halt in gold," Sagiv Perez, a senior dealer at Finotec Trading U.K. in London, said by phone.

Gold futures for April delivery lost $5.40, or 0.5 percent, to $1,137.90 an ounce on the New York Mercantile Exchange's Comex unit at 8:22 a.m. local time. Gold for immediate delivery in London fell 0.1 percent to $1,138.43.

The metal was little changed at $1,136.25 an ounce in the morning "fixing" in London, used by some mining companies to sell production, from $1,136.50 at yesterday's afternoon fixing. Gold futures, which climbed to a six-week high of $1,145.80 yesterday, typically move inversely to the dollar.

The euro also fell after German Chancellor Angela Merkel said a meeting tomorrow with Greek Prime Minister George Papandreou won't be "about aid commitments." Merkel faces domestic opposition to tapping taxpayers to extend a financial lifeline to Greece. Demonstrators occupied the Greek finance ministry today to protest planned austerity measures.

Slow Withdrawal

ECB officials will debate today whether to slow the withdrawal of emergency measures used to fight the global financial slump. The ECB kept its benchmark rate at a record low 1 percent at its meeting today. President Jean-Claude Trichet holds a press conference from 2:30 p.m. in Frankfurt.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, rose a second day yesterday, gaining 3.96 metric tons to 1,115.51 tons, according to the company's Web site.

"An increase in ETF holdings highlighted bullion's growing safe-haven appeal," Pradeep Unni, an analyst at Richcomm Global Services in Dubai, said in a report. "The general momentum is still there for it to push higher."

Silver for May delivery in New York added as much as 0.4 percent to $17.395 an ounce and last traded at $17.30. Platinum for April delivery rose as much as 0.4 percent to a one-month high of $1,589.40 an ounce and was recently down 0.1 percent at $1,581.90. Palladium for June delivery gained 1.9 percent to $459 an ounce and earlier reached $464.20, the highest price since Jan. 21.

Last Updated: March 4, 2010 08:44 EST