London : Gold declined for a second day in London as a stronger dollar may curb demand for the metal as an alternative investment.
The US Dollar Index, a six-currency gauge of the greenback's strength, climbed to a six-month high on speculation the European Central Bank will refrain from ending emergency measures today as Greece struggles to contain its deficit. Gold typically moves inversely to the US currency.
"The stronger dollar tone has weighed on gold," James Moore, an analyst at London-based thebulliondesk.com, said in a report. "Physical and investment demand are expected to provide background support."
Gold for immediate delivery fell $6.68, or 0.6 percent, to $1,103.13 an ounce at 10.50am local time. Prices dropped 0.4 per cent yesterday. Bullion for April delivery was down 0.8 per cent at $1,103.60 on the New York Mercantile Exchange's Comex unit.
The metal slipped to $1,102.50 an ounce in the morning "fixing" in London, used by some mining companies to sell production, from $1,115.25 at yesterday's afternoon fixing.
"Fiscal worries in the euro-zone countries weighed on sentiment," fuelling demand for the dollar, Darren Heathcote, an analyst at Investec Bank Ltd., wrote in a report. "Higher US interest rates are also seen as denting the appeal of gold."
Increasing difficulty
The euro has dropped 3.3 per cent against the dollar this year on concern Greece and other so-called peripheral nations will face increasing difficulty in curbing budget deficits that are in excess of European Union limits.
Greece, Portugal and Spain have suffered a "permanent" decline in competitiveness since joining the euro, European Monetary Affairs Commissioner Joaquin Almunia said yesterday.
Gold advanced 24 percent last year as the Federal Reserve held interest rates near zero to spur growth, helping weaken the dollar.
The ECB will probably keep interest rates at a record low one per cent and refrain from unwinding any more emergency lending measures.
