Gold Falls Most in Four Weeks as Dollar Rises Against Euro

Dec. 2 (Bloomberg) -- Gold prices in New York fell the most in four weeks as the dollar erased earlier declines to a record against the euro.

Gold, which has climbed 8.7 percent this year, is being bought and sold by speculators as a hedge against changes in the dollar, said Dennis Gartman, editor of the Suffolk, Virginia-based Gartman Letter. Gold may fall to $405 an ounce in the next few weeks as the dollar rallies, Gartman said yesterday.

``I don’t think gold will be as good a sector in 2005 because of the dollar,’’ Ewen Cameron-Watt, head of investment strategy and research at Merrill Lynch Investment Managers, which oversees $478 billion, said at a conference in London.

Gold futures for February delivery fell $3.60, or 0.8 percent percent, to $452.30 an ounce on the Comex division of the New York Mercantile Exchange, the biggest drop since Nov. 2. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

Gold prices next year probably won’t rise above $500 an ounce with gains limited by a recovery in the dollar, Cameron-Watt said.

Gold prices earlier touched $458.70 an ounce, the highest since June 1988. Prices have been trading at or close to a 16-year high since Nov. 4 as the dollar fell against the euro amid concern the U.S. trade and budget deficits will hurt the U.S. currency. Thirteen of 23 commodity prices have gained this year amid increased global demand and reduced supply of everything from coffee to copper and gasoline.

``It’s always the dollar’’ that moves gold, said Carlos Perez- Santalla, president of Hudson River Futures in New York. ``The U.S. deficit is going to continue to keep the dollar weaker, and increased global demand for commodities will be inflationary.’’

Investors should hold at least 7 percent of their assets in gold as insurance against declines in the dollar, Juerg Kiener, Singapore-based chief investment officer for Swiss Asia Capital, said yesterday. Gold stands to become less a commodity and more like a strong currency, he said.

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