Sept. 3 (Bloomberg) -- Gold slumped for the fourth day as lower crude oil prices and a stronger dollar reduced the appeal of the precious metal as a hedge against inflation and as an alternative asset.

Bullion touched a two-week low yesterday as oil dropped as much as 8.7 percent after Hurricane Gustav appeared to cause only light damage to oil facilities in the Gulf of Mexico. Shares in gold mining companies also fell today. The U.S. dollar rallied to the highest in more than seven months today.

``Our view is that gold is entering a period of volatile consolidation following the sharp July-August sell-off,'' Greg Canavan, analyst at Fat Prophets Management Ltd., said today by phone from Sydney.

Bullion for immediate delivery fell 0.8 percent to $898.80 an ounce at 2:04 p.m. in Singapore. Silver for immediate delivery was 0.8 percent lower at $12.9637 an ounce.

Crude oil for October delivery fell 0.9 percent to $108.76 a barrel on the New York Mercantile Exchange at 2:04 p.m. in Singapore. The contract fell 7.1 percent in the past three days to reach a five-month low.

``The weakness is being driven by a resurgent U.S. dollar,'' said Canavan.

The dollar rose to $1.4412 against the euro today, the highest since Jan. 22 in Singapore before a report later today forecast to show European retail sales declined in July from a year earlier. The currency traded at $1.4446 at 2:07 p.m. in Singapore.

Newcrest Mining Ltd., Australia's largest gold mining company, fell 9 percent to close at A$22.60 on the Australian stock exchange, its biggest one-day fall since Aug. 5.

Newcrest, Lihir

The stock, which has slumped 32 percent this year, has dropped for three days and has a market value of A$10.2 billion ($8.4 billion). Lihir Gold Ltd., the second-largest producer on the Australian stock exchange, declined 8.4 percent to A$2.06.

``The gold price is going down and the U.S. equities got smacked last night so you knew it was going to happen today,'' Hunter Hillcoat, an analyst at Austock Securities Ltd. in Sydney, said by phone. ``What we are seeing is not necessarily a surprise but the viciousness of it is a surprise.''

December-delivery gold fell 0.8 percent to $803.90 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at 2:07 p.m. in Singapore.

December-delivery gold traded in Shanghai fell 1.2 percent to 178.40 yuan a gram ($810 an ounce).

In Japan, gold for August delivery on the Tokyo Commodity Exchange was little changed at 2,817 yen a gram ($804 an ounce).

To contact the reporter on this story: Feiwen Rong in Singapore at frong2@bloomberg.net

Last Updated: September 3, 2008 02:23 EDT