Gold Declines in New York on Speculation Dollar Will Halt Slide

AiYa

Gold in New York fell after the U.S. trade deficit narrowed more than forecast in October, halting the dollar's slide against the euro and eroding the metal's appeal as an alternative investment.

Gold, sold in dollars, generally moves in the opposite direction of the U.S. currency. The metal is up 22 percent this year, while the dollar has fallen 10 percent against the euro. The trade gap, the amount by which imports exceed exports, narrowed to $58.9 billion from $64.3 billion in September, the Commerce Department said.

``The relatively small deficit figure will support the dollar, and that will tend to cap any short-term gains in the gold market,'' said Daniel Vaught, a commodity analyst at A.G. Edwards Inc. in St. Louis.

Gold futures for February delivery dropped $2.10, or 0.3 percent, to $632.70 an ounce at 10:58 a.m. on the Comex division of the New York Mercantile Exchange. Prices earlier touched $631.50.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

Traders were reluctant to makes bets before the Federal Reserve meeting today, some analysts said. Fed policy makers will probably keep the benchmark interest rate unchanged at 5.25 percent. The central bank hasn't raised rates since June after two consecutive years of increases.

The Fed decision ``has the potential to trigger another bout'' of gold sales, said James Moore, an analyst in Kettering, England, for TheBullionDesk.com. ``It's still a largely dollar story for gold.''

Gold has declined this month, even as the dollar traded at a 20-month low against the euro. The metal has dropped 3.1 percent since closing at $652.90 on Nov. 30, the highest since Aug. 9.

``The seasonal strength in gold has run its course,'' Vaught of A.G. Edwards said. ``The market has seemingly posted its fourth quarter top.''

kwy