Gold futures fell to a three-week low as the dollar’s rally curbed demand for the metal as an alternative investment. Silver tumbled 4 percent.
The greenback rose to a six-week high against a basket of major currencies on demand for a haven amid European and U.S. debt concerns. Still, holdings in exchange-traded products backed by gold climbed to a record as investors sought higher returns amid slumping equities and turmoil in currency markets.
“We have a firmer dollar, and that is negative for gold,” Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said by telephone. “There might be some small bargain-hunting at these levels, but I’m looking more for the downside in gold than the upside.”
Gold futures for December delivery fell 2.7 percent to close at $1,678.60 an ounce at 1:50 p.m. on the Comex in New York. Earlier, the metal touched $1,667.10, the lowest for a most-active contract since Oct. 25. The price settled below $1,700 for the first time since Oct. 24.
The MSCI World Index of equities dropped for the sixth straight session, heading for the longest slump in three months, and U.S. Treasuries rose. Gold, which dropped 3.5 percent last week, has climbed 18 percent this year.
“The market is in a completely ‘risk-off’ mentality today, and gold hasn’t been seen as a flight-to-safety vehicle lately,” Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “I don’t think the long-term outlook has changed, though.”
Holdings in gold-backed ETPs climbed 16.5 metric tons on Nov. 18 to an all-time high of 2,339.97 tons, data compiled by Bloomberg show.
Silver futures for March delivery dropped $1.302 to $31.187 an ounce. Earlier, the price touched $30.74, the lowest since Oct. 21. The metal has climbed 15 percent in the past 12 months.
On the New York Mercantile Exchange, palladium futures for December delivery dropped 3.2 percent to $585.80 an ounce. Platinum futures for January delivery declined 2.8 percent to $1,543.80 an ounce.