Gold ends lower amid dollar gains, crude decline

NEW YORK (MarketWatch) -- Gold futures finished down Monday, as gains in the U.S. dollar and declining crude-oil prices dampened demand for the precious metal.
Gold for February delivery fell $3.70 to end at $862 an ounce on the New York Mercantile Exchange.
"Given the recent surge in metal prices, a period of consolidation is healthy for the longevity of the current bull-trend," said James Moore, an analyst at TheBullionDesk.com, in a research note.
Gold futures also ended down Friday, losing $3.40 an ounce, but the benchmark contract tallied a weekly gain of $23, or about 2.7%.
"With little improvement in the health of the U.S. economy, interest rates still forecast to move lower, record oil prices creating inflationary pressure and little improvement in the geopolitical climate, gold should remain in a strong mood and look to challenge $900 an ounce during the first quarter," Moore said.
The dollar rose against most major counterparts, as investors covered short positions taken after last Friday's dismal U.S. payrolls data. The dollar index, which tracks the performance of the greenback against a basket of other currencies, gained 0.6% to 76.210.
Crude-oil futures tumbled nearly 3%, as traders rushed to lock in gains amid escalating worries that a worsening economic slowdown could lower U.S. oil demand. See Futures Movers.
"Volatility looks set to increase in the gold market, but the fundamentals remain strong with the poor jobs report further showing a slowing US economy which nevertheless faces considerable inflationary pressures," said Mark O'Byrne, director of Gold and Silver Investments Ltd., in a research note.
A government survey showed Friday that U.S. payrolls grew at the slowest pace in more than four years. Meanwhile, Treasury Secretary Henry Paulson said Monday that the White House won't rush to propose a fiscal stimulus plan to boost the U.S. economy. See full story.
"Let me be clear that no single policy or action will undo the excesses of the last few years," Paulson said, in excerpts of a speech planned for later on Monday.
Also on the Nymex, March silver dropped 17.20 cents, or 1.1%, to $15.920 an ounce. January platinum fell $14.90 to $1,524.20 an ounce and March palladium dropped 90 cents to $376.85 an ounce. In a report released to the media Monday, Merrill Lynch analyst Michael Jalonen also forecast silver prices averaging $14 an ounce this year. Increased costs -- up 5% to 7% in 2008 -- will continue to weigh on gold producers, but Jalonen said higher gold prices and credits for other mining byproducts will offset higher cash costs.