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US Markets closed as gold Falls From Record in London as Dollar Rebound Spurs Sales

By Nicholas Larkin and Gavin Evans

Nov. 26 (Bloomberg) -- Gold fell for the first time this week in London as a stronger dollar prompted investors to sell the metal after it reached a record. Other precious metals slid.

Bullion earlier rose to a record for the third time this week. Sri Lanka bought 10 metric tons from the International Monetary Fund for about $375 million, the IMF said yesterday, following India and Mauritius. The metal slipped after the U.S. Dollar Index rebounded from a 15-month low.

“Gold has run into profit-taking” and “is vulnerable to corrections,” James Moore, an analyst at TheBullionDesk.com in London, said today in a report. “However, with the dollar expected to extend its decline, gold seems certain to challenge the $1,200 level in the very near future, as investment demand remains very strong.”

Gold for immediate delivery dropped $3.42, or 0.3 percent, to $1,188.38 an ounce at 7:39 p.m. in London. That erased a gain to as high as $1,195.13.

Bullion futures for February delivery on the New York Mercantile Exchange’s Comex unit rose 0.4 percent to $1,193.80 an ounce after earlier reaching a record $1,196.80. Yesterday the contract rose for a ninth day, the longest rally since August 1982.

Most U.S. markets are closed today for the Thanksgiving Day holiday. Comex floor trading is shut.

Record ‘Fixing’

The metal slipped to $1,182.75 an ounce in the afternoon “fixing” in London from a record $1,183 in the morning fixing. Some mining companies use fixings to sell production.

Sri Lanka’s purchase followed yesterday’s Financial Chronicle report that India, the world’s largest consumer, may add to the 200 tons it bought last month for $6.7 billion from the IMF. Reserve Bank of India Governor Duvvuri Subbarao declined to comment.

The sale to Sri Lanka was the IMF’s third in recent weeks to a central bank after the Indian transaction and a 2-ton disposal to Mauritius for $71.7 million. The IMF has about 190 tons remaining from the 403.3 tons it said Sept. 18 it would divest. China is “quite a likely” buyer in coming weeks, said Ben Westmore, an analyst with National Australia Bank.

“A lot of central banks want to diversify out of U.S. dollar holdings and replace them with gold,” he said. “You’ve got a lot of added demand that not many people would have expected.”

‘A Good Time to Buy’

Sri Lanka has been “gradually” accumulating the metal in the last seven months, Central Bank Governor Nivard Cabraal said in an interview in Singapore today. “It’s a good time to buy,” he said.

Russia’s central bank also has bought gold, and Sri Lanka said earlier this month it would keep making purchases. That prompted analysts at Bank of America Merrill Lynch, Societe Generale SA and Barclays Capital to forecast more state purchases. Governments are the biggest bullion holders.

“The market is now convinced that many developing-economy central banks will keep buying bullion from the IMF to diversify their reserves,” Darren Heathcote, an analyst with Investec Bank Ltd., wrote in a report yesterday.

The dollar index gained as much as 1 percent today, its first increase this week, on Dubai’s attempt to reschedule its debt. The currency usually moves inversely to bullion. The measure has lost 8 percent this year as gold has rallied 35 percent, heading for the biggest annual increase since 1979.

Relative Strength

The rally has pushed immediate-delivery gold’s 14-day relative strength index, a gauge of whether a commodity or security is overbought or oversold, above 70. Some investors and analysts who follow technical charts view that level as a sign prices may fall. Today’s reading was 81.5.

Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, increased 5.49 tons to 1,127.86 tons as of Nov. 25, according to the company’s Web site.

The U.S. Mint suspended sales of American Eagle Gold Proof coins because of depleted inventories and will resume “once sufficient inventories of gold-bullion blanks can be acquired to meet market demand,” it said on its Web site. Sales of American Eagle gold coins jumped to 1.07 million ounces this year through October from 568,000 a year earlier, the site shows.

Among other precious metals for immediate delivery in London, silver slid 1 percent to $18.665 an ounce. Platinum rose as much as 0.8 percent to $1,483.80 an ounce, the highest since August 2008, before slipping 1.1 percent to $1,456. Palladium fell 0.7 percent to $370.50 an ounce.

Platinum will average $1,577 an ounce next year, 15 percent more than previously forecast, UBS AG said today in a report, citing increased industrial demand. The bank raised its 2010 palladium estimate by 26 percent to $321 an ounce and its rhodium outlook by 43 percent to $2,366 an ounce. Rhodium traded at $2,800 today, matching yesterday’s 13-month high, according to Johnson Matthey Plc prices on Bloomberg.

ETF Securities Ltd.’s platinum holdings added 0.2 percent to a record 427,576 ounces yesterday, its Web site showed. Palladium assets increased 0.8 percent to a record 629,906 ounces.

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