Gold drops most since January after dollar index extends gains

The U.S. Dollar Index, a six-currency gauge of the greenback's value, extended its rebound from a 15-month low after Dubai's efforts to reschedule its debt rattled investors. Prices of other precious metals, crude oil and all six main industrial metals on the London Metal Exchange declined. Gold climbed to a record Thursday.

“The market is reacting to the news on Dubai,” said Bernard Sin, head of currency and metals trading at bullion refiner MKS Finance SA in Geneva. Gold for immediate delivery dropped as much as US$50.28, or 4.2 percent, to US$1,138.10 an ounce, the biggest intraday slide since Jan. 12. The metal traded at US$1,162.63 by 11:16 a.m. in London.

Futures for February delivery on the New York Mercantile Exchange's Comex unit slid 2.1 percent to US$1,163.60 an ounce.

The metal fell to US$1,164.50 in the morning “fixing” in London, used by some mining companies to sell production, from US$1,182.75 at Thursday's afternoon fixing. Spot prices are up 1.1 percent this week, set for a fourth weekly increase.

Among other precious metals for immediate delivery in London, silver declined as much as 5.3 percent, the most in three months, to US$17.68 an ounce, and last traded at US$18.035.

Platinum dropped 1.2 percent to US$1,438 an ounce. The metal will likely outperform gold in the year ahead on improving industrial demand and higher production costs, Standard Chartered said. Palladium slid as much as 4.7 percent to US$353.25 an ounce, the biggest drop since June, and was last at US$361.

The dollar index gained as much as 1 percent as Dubai World, the government investment company with US$59 billion of liabilities, sought to delay repayment on debt. The currency measure is down 7.4 percent this year.

Gold's drop Friday may be an opportunity for buyers, analysts including Goldman Sachs (Asia) LLC's Janet Kong said. Gold, up 32 percent this year, is set for a ninth annual gain as central banks, pension funds and individual buyers seek to protect their assets from potential currency debasement and inflation. Central banks will remain net buyers in the year ahead, for the first time in more than two decades, Standard Chartered Plc said Friday in a report.

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