July 2 (Bloomberg) -- Gold declined as a stronger dollar reduced demand for the precious metal as an alternative investment. Silver futures also fell.

The U.S. Dollar Index, a six-currency measure of the greenback’s value, gained as much as 0.9 percent. The dollar climbed after a U.S. government report showed employers cut more jobs in June than economists had forecast. The dollar also strengthened as European Central Bank policy makers left the benchmark interest rate at a record low.

“The U.S. dollar recovered and the precious metals followed suit and lost some of yesterday’s gains,” Miguel Perez-Santalla, a Heraeus Precious Metals Management sales vice president in New York, said in a note.

Gold futures for August delivery slid $10.30, or 1.1 percent, to $931 an ounce on the New York Mercantile Exchange’s Comex division. The most-active contract fell 1.1 percent this week. The U.S. markets are closed tomorrow.

Bullion for immediate delivery in London fell $9.73, or 1 percent, to $931.07 an ounce at 8:10 p.m. London time. Spot prices are heading for a fourth weekly decline in five weeks.

The metal slipped to $929.50 an ounce in the afternoon “fixing” in London, the price used by some mining companies to sell their output, from $938.25 yesterday.

Gold futures, which typically fall when the dollar gains, dropped 5.4 percent last month as the dollar index added 1 percent. The index was headed for a 0.4 percent weekly gain.

Silver futures for September delivery fell 35.2 cents, or 2.6 percent, to $13.408 an ounce in New York. The metal fell 5.3 percent this week.

Job Losses

Employers cut 467,000 jobs last month, the Labor Department reported today in Washington. The median forecast of 79 economists surveyed by Bloomberg News was for a reduction of 365,000. The unemployment rate climbed to 9.5 percent.

Gold investment in nine bullion-backed exchange-traded funds tracked by UBS AG slowed in June, while silver allocation accelerated, the bank said.

Gold held in the ETFs rose to 53.67 million ounces last month from 53.22 million ounces in May, John Reade, the bank’s head metals strategist in London, said today in a report. The increase was almost half that of the previous month, “due to strong performances by other, riskier asset classes,” he said.

Silver assets in ETFs reached a record in June as holdings rose to 343 million ounces, Reade said.

Morgan Stanley raised its 2009 estimate for silver by 11 percent to $14.04 an ounce. A global economic recovery may boost industrial use, while investment demand remains “resilient,” it said in a report dated yesterday. Products from chemical catalysts to ball bearings are made with the metal, the Silver Institute says on its Web site.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Halia Pavliva in New York at hpavliva@bloomberg.net.

Last Updated: July 2, 2009 15:13 EDT