Gold falls on concern dollar gains will cut demand

The gold fell 3.77 dollar, or 0.2 per cent, to 1,595.18 dollar an ounce. Prices dropped 6.6 per cent last week, the most since September 23, and touched a two-month low of 1,560.97 dollar on December 15.

Silver also fell 2.4 per cent to 29.04 dollar an ounce, taking its loss this year to 6.1 per cent.
Gold dropped last week as the dollar climbed to an 11-month high versus the euro. Fitch Ratings lowered its outlook for France’s credit ranking to negative from stable, saying the country’s budget deficit and government borrowings make it more vulnerable to the region’s debt crisis than other top-rated euro-zone nations.

A stronger dollar “is likely to weigh upon gold prices in the absence of strong physical demand over the remaining weeks of the year.

Gold, up 12 per cent this year, reached a record 1,921.15 dollar on September 6 as investors sought to diversify away from equities and some currencies amid concerns that the euro zone may fragment. Since then, it’s lost 17 percent.

The dollar gained 0.5 per cent versus the euro today after North Korean national leader Kim Jong Il died, spurring concern instability may increase in the region and boosting demand for the U.S. currency as a haven. (Bloomberg)