Gold declined for the first time in three days in London as a stronger dollar curbed demand for the metal as an alternative asset and as some investors sold bullion after its rally to a record.
The dollar gained as much as 0.7pc against the euro today. Gold, which usually moves inversely to the greenback, reached a record $1,364.77 an ounce on October 7.
Bullion’s rally had driven the relative strength index above 70, a sign to some analysts and traders who study technical charts that prices may be poised to drop.
“The US dollar is a bit stronger, which is a negative,” Peter Fertig, owner of Quantitative Commodity Research Ltd in Hainburg, Germany, said today by phone.
There may be “a bit of profit-taking,” and lower prices for other commodities are pressuring gold, he said.
Immediate-delivery bullion lost $11.35, or 0.8pc, to $1,342.70 an ounce at 11:20am in London. Gold for December delivery was 0.8pc lower at $1,343.40 an ounce on the Comex in New York.
Bullion fell to $1,343.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,351.50 at yesterday’s afternoon fixing.
Five of the six main industrial metals on the London Metal Exchange and crude oil futures in New York declined today. Silver, platinum and palladium also fell.
Gold should account for 15pc of a portfolio on a three-year view and 13pc on a six-month view, Fredrik Nerbrand, global head of asset allocation at HSBC Bank, said in a report today.
The metal is “not merely a hedge against inflation but one of the few assets that hedges against tail risks,” Nerbrand said in “The Allocator” report.
“The fact that gold is still under-owned and opportunity costs are still low should boost investor appetite further.”
Gold, up 23pc this year, is heading for its 10th consecutive annual gain, the longest winning streak since at least 1920.
Bullion has outperformed global equities, Treasuries and most industrial metals, prompting record investment in gold-backed exchange-traded products.
The metal rallied as central banks and governments maintained low borrowing costs and spent trillions of dollars to stimulate economies.
“Gold has run so hard in the past couple of months that it was ready for a bit of a breather and we are just seeing a bit of consolidation,” said Ben Westmore, a minerals and energy economist at National Australia Bank in Melbourne.
The movement in the dollar was likely a catalyst today for some weakness in the metal, he said.