Gold prices may fall as stronger dollar curbs demand

The dollar rose as much as 0.4 percent against the euro to trade near a three-month high amid signs that the world's largest economy is gaining traction. Last week, gold fell for a third straight week, touching the lowest level since Nov. 6 as the U.S. currency rebounded.

“With the stronger dollar still the primary driving force, the metal remains at risk to a dip back to the US$1,050-US$1,080 area,” James Moore, an analyst at TheBullionDesk.com in London, said in a report.

Gold for immediate delivery fell US$1.28, or 0.1 percent, to US$1,111.92 an ounce at 9:14 a.m. local time. The metal fell 0.2 percent last week. Bullion futures for February delivery on the New York Mercantile Exchange's Comex unit added 0.1 percent to US$1,112.50 an ounce.

The precious metal has weakened 9.4 percent from an all- time high of US$1,226.56 reached on Dec. 3 as the dollar gained 5.3 percent against the euro in the period. Bullion typically moves inversely to the dollar.

Prices rose 1.3 percent on Dec. 18 after a confrontation between Iraqi and Iranian forces over a disputed oil well increased “geopolitical risks in the Middle East,” said Hwang Il Doo, a senior trader with KEB Futures Co. in Seoul. Iranian troops withdrew from the al-Fakah well on Dec. 19, Iraqi government officials said Sunday.

Among other precious metals for immediate delivery in London, silver added 0.3 percent to US$17.30 an ounce. Platinum gained 0.2 percent to US$1,431.25 an ounce and palladium was 0.1 percent higher at US$364.45 an ounce.

“Gold prices have obviously came under the pressure on the dollar's reversal,” said Toby Hassall, an analyst with CWA Global Markets Pty Ltd. in Sydney. “The dollar will continue to be the primary driver.”

Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, increased 6.1 metric tons to 1,126.61 tons on Dec. 18, its Web site showed. They climbed to a record 1,134 tons on June 1.

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