us dollar gold effect

Gold Gains as Dollar Drops, Boosting Metal's Investment Appeal

By Danielle Rossingh

Oct. 31 (Bloomberg) -- Gold rose in London and New York as the dollar fell to the lowest in more than a month against the euro, making the metal more appealing as an alternative investment to U.S. stocks and bonds.

The dollar slid after an industry report showed manufacturing in the Chicago area slowed and U.S. consumer confidence unexpectedly dropped this month. Gold, sold in dollars, generally moves in the opposite direction of the U.S. currency. Bullion has gained 17 percent this year as the dollar has lost almost 8 percent against the euro.

``The dollar is still one of the key factors,'' James Moore, a Kettering, England-based analyst with TheBullionDesk.com, said in a telephone interview today.

Gold for immediate delivery in London gained as much as $2.65, or 0.4 percent, to $606.75 an ounce and traded at $605.74 at 4:13 p.m. local time.

Gold futures for December delivery were unchanged at $607.40 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, they rose as much as 0.3 percent to $609.30. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

The dollar fell to at $1.2770 per euro in London, from $1.2725 in late New York yesterday.

Today's consumer confidence data added evidence to the slowdown in the world's largest economy. That raised speculation that the Federal Reserve may have to cut borrowing costs early next year and dimmed the appeal of dollar-denominated assets.

The U.S. currency fell last week while gold rose after the economy expanded at the slowest pace in more than three years.

``People are paying attention to the dollar again as it's the leading indicator of the U.S. economy,'' David Gornall, head of foreign exchange and bullion at Natexis Commodity Markets Ltd. in London, said in via telephone today.

Among other precious metals for immediate delivery, silver climbed 6 cents to $12.17, palladium slid $6.75 to $319.50 while platinum declined $9.50 to $1,0780.

To contact the reporter on this story: Danielle Rossingh in London at [email protected] .

Last Updated: October 31, 2006 11:23 EST