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Gold price drops on dollar rise

20 January 2010 12:42 (UTC +04:00)

Baku-APA-Economics. Gold dropped for the first time in three days in London as a stronger dollar eroded demand for the precious metal as a store of value. Platinum declined from a 17- month high, Bloomberg reported.

The U.S. Dollar Index, a six-currency gauge of the strength of the greenback, rose as much as 0.7 percent on concern Greeceâ€™s fiscal problems will slow an economic recovery in the euro zone. Gold typically moves inversely to the dollar, which climbed to a five-month high against the euro.
Gold for immediate delivery lost $6.38, or 0.6 percent, to $1,131.82 an ounce at 9:07 a.m. local time. Bullion for February delivery was 0.7 percent lower at $1,131.80 on the New York Mercantile Exchangeâ€™s Comex division.
The dollar index is little changed this year after a 4.2 percent drop in 2009. The currency slumped last year as the Federal Reserve held interest rates near zero to revive the U.S. economy and investors favored higher-yielding currencies and assets on expectations of a recovery from the world recession.
Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, declined 0.91 metric ton to 1,111.92 tons yesterday, according to the companyâ€™s Web site.
Platinum for immediate delivery fell 0.4 percent to $1,638.05 an ounce, erasing a gain of as much as 0.7 percent to a 17-month high of $1,657.38.
One ounce of platinum now costs about $506 more than an ounce of gold, a spread last seen when Lehman Brothers Holdings Inc. filed for bankruptcy in September 2008. Platinum prices briefly fell below gold for the first time in 12 years in December 2008.
Among other precious metals for immediate delivery in London, silver fell 0.9 percent to $18.585 an ounce. Palladium declined 1.5 percent to $459.38 an ounce after five advances in a row.