Gold fell for a fourth day in London as the dollar strengthened against the euro, diminishing demand for the metal as an alternative investment. Platinum also fell.
The relationship between gold and the euro-dollar exchange rate is strengthening, with a correlation of 0.68 this year compared with 0.47 in the same period last year. The dollar is set for a second weekly drop versus the euro on concern a U.S. bailout of the banking system will be delayed by Congress.
''The dollar was strong this morning,'' Sagiv Peretz, a senior dealer at trading-system operator Finotec Trading U.K. Ltd., said by phone from London. ''That pushed gold lower.''
Gold for immediate delivery fell $4.43, or 0.5 percent, to $873.47 an ounce as of 11:52 a.m. in London. Futures for December fell $5.80, or 0.7 percent, to $876.20 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange.
Peretz expects gold to trade above $900 an ounce in the next two weeks.
''Inflation pressure is rising because of all the bailouts, because of the monetization of the debt,'' Peretz said.
Negotiations for a $700 billion rescue of the U.S. financial system faltered yesterday as some House Republicans said they wouldn't support the plan proposed by Treasury Secretary Henry Paulson.
Investment Flows
With the U.S. ''rescue package stalling we could see further inflows of investment demand in the coming sessions, potentially giving gold the momentum to form a base above $900,'' James Moore, an analyst at TheBullionDesk.com, wrote today in a report.
Gold in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, fell for the first time in two weeks.
Gold held by the company dropped to 723.71 metric tons yesterday from a record 724.94 tons the previous day, according to figures posted on the company's Web site.
The precious metal fell to $869 an ounce in the morning ''fixing'' in London, used by some mining companies to sell production, from $888.50 at the previous afternoon fixing.
Among other metals for immediate delivery, silver fell 4 cents, or 0.3 percent, to $13.17 an ounce, platinum fell $40.75, or 3.4 percent, to $1,144.75 an ounce and palladium fell $3.75, or 1.6 percent, to $235.75.
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