Stronger greenback bad news for gold

Gold fell below $1,700 an ounce to the lowest in almost three weeks in New York as a stronger dollar curbed demand for the metal as an alternative investment. The greenback rose against the euro, and European equities fell amid signs U.S. lawmakers will fail to reach an agreement on budget cuts. Spain's People's Party won a parliamentary majority, making the ousted Socialists the fifth European government to be toppled amid the region's debt crisis. Holdings in exchange-traded products backed by gold climbed to a record. “We have a firmer dollar, and that is negative for gold,” Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said by telephone. “There might be some small bargain-hunting at these levels, but I'm looking more for the downside in gold than the upside.” Gold futures for December delivery slipped 2.3 percent to $1,685.90 an ounce at 11:12 p.m., after earlier touching $1,682.40, the first time the most-active contract dropped below $1,700 since Nov. 1. The metal slid 3.5 percent last week. In London, gold for immediate delivery lost 2.1 percent to $1,687.30. Gold's drop today took it below its 50-and 100-day moving averages. The need to “cover losses in other sectors will likely keep gold under pressure in the short term,” James Moore, an analyst at TheBullionDesk.com in London, wrote today in a report. A drop below the 50- and 100-day moving averages may push gold toward $1,680, he said. Record Prices Bullion is in the 11th year of a bull market, and futures reached a record $1,923.70 on Sept. 6 as investors sought to diversify away from equities and some currencies. Holdings in gold-backed ETPs climbed 16.5 metric tons on Nov. 18 to an all- time high of 2,339.97 tons, data compiled by Bloomberg show. Lawmakers on the U.S. congressional subcommittee today are expected to say they can't reach agreement on a plan to cut the budget by at least $1.2 trillion. Today is the target date for the Congressional Budget Office to receive the panel's plan so that it can analyze any agreement before a Nov. 23 deadline. While physical demand for bullion has weakened since September, Barclays Capital said it remains “positive” on the outlook for the metal, citing stronger investment interest. Prices will average $1,875 this quarter and $2,000 next year, it said in an e-mailed report. “The market is in a completely risk-off mentality today, and gold hasn't been seen as a flight-to-safety vehicle lately,” Bill O'Neill a partner at Logic Advisors, said by telephone from Upper Saddle River, New Jersey. “ I don't think the long-term outlook has changed for gold, though.” Gold has averaged about $1,705 this quarter and $1,563 in 2011, estimates compiled by Bloomberg show. --Bloomberg News--