Sept. 10 (Bloomberg) -- Gold fell in New York as the dollar rose against the euro before retreating, curbing the metal’s appeal as an alternative investment, and as some investors sold bullion after a rally to an 18-month high. Silver declined. The dollar gained as much as 0.4 percent against the European currency, after falling to the lowest level in almost nine months. The greenback later gave up most of its gains. On Sept. 8, Gold, which tends to rise when the dollar weakens, reached $1,009.70 an ounce in New York, the highest since March 2008. “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 $2.70 or 0.3 percent, to $994.40 an ounce at 11:43 a.m. on the New York Mercantile Exchange’s Comex division. Bullion for immediate delivery rose $2.06, or 0.2 percent, to $994.36 an ounce in London, after falling as much as 1 percent. “Precious metals have come off on the back of the stalled interest from the investment sector,” Miguel Perez- Santalla, a Heraeus Precious Metals Management sales vice president in New York, said in a note. ‘Mild Correction’ “With this mild correction on the price of metals, at a time when the U.S. dollar is still weak against the euro, any dollar strength will surely see precious metals suffer some more loss of ground,” Perez-Santalla said. The metal rose to $990.75 in the afternoon “fixing” in London, used by some mining companies to sell production, from $988.50 at the morning fixing. Spot prices gained 4.3 percent this month through yesterday as the dollar slipped 1.5 percent against the euro. “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 Bank of England today said it plans to keep buying as much as 175 billion pounds ($291 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. Price Predictions “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. Ian Williams, chief executive officer of Charteris Portfolio Managers in London, predicts gold will trade from $1,250 to $1,300 an ounce within the next six months. “Sooner or later, you get a situation where everything is going up,” Williams said in an interview with Bloomberg Television. “Gold is going up, because it’s liquidity driven.” Silver for December delivery in New York was 0.6 percent higher at $16.53 an ounce. The metal surged 18 percent in the three weeks through yesterday, and an ounce of gold now buys about 60.3 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 Falls Platinum for October delivery declined 40 cents to $1,291 an ounce in New York. Credit Agricole SA’s Calyon unit in London raised its 2010 price forecast for the metal by 8.3 percent to $1,300 an ounce, citing improving economic growth. Palladium for December delivery declined 55 cents, or 0.2 percent, to $294.50 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 devices, 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. To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Halia Pavliva in New York at hpavliva@bloomberg.net.

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