Sept. 10 (Bloomberg) -- Gold fell for a second day in New York and London as the dollar halted its slide against the euro, curbing the metal’s appeal as an alternative investment, and as some investors sold bullion after a rally to an 18-month high. The dollar was little changed after gaining as much as 0.3 percent against the single European currency, erasing a drop of as much as 0.2 percent to near the lowest level since December. Gold, which tends to rise when the greenback weakens, reached $1,009.70 an ounce in New York, the highest in almost 18 months, on Sept. 8. “It is only logical” for the metal to drop, Andrey Kryuchenkov, a VTB Capital analyst in London, wrote today in a note. “A deeper pullback in the dollar could keep prices supported, but for sustained gains we shall need to see renewed risk aversion.” Gold futures for December delivery slid $6.60, or 0.7 percent, to $990.50 an ounce on the New York Mercantile Exchange’s Comex division by 8:35 a.m. local time. Bullion for immediate delivery dropped 0.3 percent to $989.18 an ounce in London. “There is a potential for gold to fall further than this level should light profit-taking morph into more wider long liquidation,” John Reade, UBS AG’s head metals strategist in London, said today in a note. The metal slipped to $988.50 in the morning “fixing” in London, used by some mining companies to sell production, from $999.50 at yesterday’s afternoon fixing. Spot prices have gained 4 percent this month as the dollar has slipped 1.7 percent against the euro. The Bank of England today said it plans to keep buying as much as 175 billion pounds ($290 billion) in assets to cement the economy’s recovery and kept its main interest rate at 0.5 percent. Some analysts say government spending may spark accelerating inflation and currency debasement. “Gold will remain well supported, driven by dollar weakness, demand from China and inflation expectations,” Liam Fitzpatrick, a London-based analyst at Citigroup Inc., wrote today in a report. The metal will continue to trade between $900 and $1,000 an ounce, he predicted. SPDR Holdings Holdings of bullion in the SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, were unchanged at 1,077.63 metric tons yesterday, data on the company’s Web site showed. The fund reached a record 1,134.03 tons on June 1. Gold held in ETF Securities Ltd.’s exchange-traded commodities added 0.6 percent to a record 8.114 million ounces yesterday, the company’s Web site showed. Silver for December delivery in New York was 1 percent higher at $16.30 an ounce. The metal has surged 17 percent the past three weeks, and an ounce of gold now buys about 60.7 ounces of silver in London, near the least since August 2008. Silver is “vulnerable to one of its idiosyncratic collapses” and “we recommend taking any profits in silver,” UBS’ Reade said. Platinum for October delivery declined 0.8 percent to $1,281.30 an ounce. Credit Agricole SA’s Calyon unit in London raised its 2010 price forecast for platinum by 8.3 percent to $1,300 an ounce, citing improving economic growth. Palladium for December delivery declined 0.5 percent to $293.50 an ounce. “We expect silver and platinum to continue to outperform gold as economic conditions improve,” Citigroup’s Fitzpatrick wrote. Platinum, used in automotive pollution-control gear, may rise toward $1,400 an ounce by the end of the year, he wrote, citing “potential restocking in the global auto market and curtailment of supply.” Automakers account for about 60 percent of platinum and palladium use, according to metals researcher and refiner Johnson Matthey Plc. ETF Securities’ silver holdings rose 0.5 percent to a record 20.531 million ounces yesterday, while palladium assets climbed 5.5 percent to an all-time high of 482,043 ounces. The company’s platinum holdings fell 1.3 percent to 324,240 ounces. To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

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