Gold tumbles below $900 level as dollar's rise dampens appeal

London: Gold tumbled to a two-month low below the key $900-an-ounce level on Tuesday as the dollar's rise against the euro dampened the metal's appeal as an alternative investment and triggered bullion selling.

Falling oil prices also put pressure on gold, which is traditionally seen as a hedge against inflation. Other metals suffered losses, with silver slipping five per cent to a two-month low and platinum falling more about six per cent.

Gold hit a low of $884.70 and was at $887.40/$888.20 an ounce at 1411 GMT, against $916.20/$917.00 late in New York on Monday, when it fell two per cent. The metal has fallen about 14 per cent since hitting a record high of $1,030.80 two weeks ago.


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"Given the elevated level of speculative interest, we would not rule out a deepening of the current correction in prices," said Suki Cooper, precious metals analyst at Barclays Capital.

Environment

"However, the overall environment for gold remains positive over the forthcoming months," she said, adding the dollar was not expected to rise markedly against the euro in the short term, given the likelihood of poor US data this week.

The dollar rose after Swiss bank UBS announced an additional $19 billion of writedowns and Deutsche Bank said it expected to write down a more than the forecasted $4 billion in the first quarter, showing that credit problems were not limited to the United States alone.

Weaker oil prices also dragged down precious metals. Oil fell to near $100 a barrel, extending losses from the previous session.

In other markets, US gold futures for June delivery on the Comex division of the New York Mercantile Exchange fell $29.9 an ounce to $891.60.

"Given gold's recent movements, the yellow metal will remain vulnerable to selling pressure in the coming sessions, particularly as the second quarter is traditionally weaker than the first due to general market cycles," James Moore, analyst at TheBullionDesk.com, said in a market report.