Gold Drops From Two-Week High, Trimming Weekly Gain, on Dollar

By Jae Hur

April 2 (Bloomberg) -- Gold declined from a two-week high, dropping for the first time in three days as the dollar climbed, eroding the appeal of the metal as an alternative investment.

Bullion lost as much as 0.6 percent after gaining 2.1 percent in the previous two days. The dollar climbed after earlier touching the lowest level in two weeks against the euro. Gold typically moves inversely to the U.S. currency.

“It’s a correction after prices reached a two-week high,” said Hiroyuki Kikukawa, general manager of research at Tokyo- based IDO Securities Co.

Gold for immediate delivery lost $5.60 to $1,121.20 an ounce at 2:05 p.m. in Tokyo after touching $1,128.22 yesterday, the highest level since March 19. The metal has gained 1.2 percent this week.

The euro fell 0.2 percent to $1.3567 after touching $1.3591, the highest level since March 19.

Trade was thin as markets in U.K. and the U.S. are closed today for the Good Friday holiday. Bullion for June delivery, the most widely held contract, closed 1 percent higher at $1,126.10 an ounce yesterday on the Comex division of the New York Mercantile Exchange.

Thirteen of 23 traders, investors and analysts surveyed by Bloomberg, or 57 percent, said bullion would rise next week. Five forecast lower prices and five were neutral.

“The bullion market may be supported next week by an improving economy and a weaker dollar,” Kikukawa said. “With the start of the second quarter, an influx of speculative funds may also underpin the market.”

Shares Gain

The MSCI World Index of shares climbed to an 18-month high as signs of strength in global manufacturing and a drop in U.S. jobless claims boosted confidence in the economic recovery. Crude oil surged to a 17-month high yesterday.

Silver for immediate delivery was little changed at $17.92 an ounce after touching $17.9925 yesterday, the highest level since Jan. 21. The metal has risen 6.1 percent this week, the biggest gain since the week ended Jan. 8.

Palladium gained 0.7 percent to $494.25 an ounce, the highest level since March 2008. It has risen 7.9 percent this week.

Spot platinum dropped 0.4 percent to $1,662.75 an ounce after touching $1,674.68 yesterday, the highest level since August 2008. The metal has advanced 4.1 percent this week, the first weekly gain in three.

To contact the reporter on this story: Jae Hur in Tokyo at jhur1@bloomberg.net
Last Updated: April 2, 2010 01:14 EDT