By Pham-Duy Nguyen and Nicholas Larkin Dec. 4 (Bloomberg) -- Gold fell for the first time this week, heading for the biggest drop in a year, as a rising dollar spurred some investors to sell bullion on the heels of a rally to a record. The U.S. Dollar Index, a six-currency gauge of the greenback’s value, rose as much as 1.3 percent after a government report showed U.S. employers cut fewer jobs last month than forecast. Gold futures fell as much as 4.9 percent from a record of $1,227.50 an ounce, set yesterday in New York. “So many people have piled into gold, so this pop in the dollar is freaking people out,” said Matt Zeman, a metals trader at LaSalle Futures Group Inc. in Chicago. “The dollar is rocking and gold is getting its teeth kicked in.” Gold futures for February delivery fell $48.50, or 4 percent, to $1,169.80 an ounce at 11:52 a.m. on the New York Mercantile Exchange’s Comex unit. A close at that price would mark the biggest drop for a most-active contract since Dec. 1, 2008. In London, gold for immediate delivery dropped $38.78, or 3.2 percent, to $1,168.82 an ounce. Employers in the U.S. cut the fewest jobs in November since the recession began, according to figures released today by the Labor Department in Washington. “Gold is going to remain vulnerable to these sell-offs,” Zeman said. “The dollar is rocketing higher because economic recovery will eventually lead to rate hikes.” Dollar Decline The dollar has dropped this year as the Federal Reserve kept benchmark U.S. interest rates near zero percent since December 2008 in a bid to revive lending after the worst financial crisis since World War II. Before today, the dollar index sank 8.2 percent while gold rallied 38 percent. “Not only is speculative length in gold at a record high, history shows U.S. dollar losses in December will be recouped in the first four weeks of the new year,” Deutsche Bank AG analysts said today in a report. Gold’s rally pushed its 14-day relative strength index, a gauge watched by some investors as an indicator of future direction, to 83.5 yesterday. Some analysts and investors who use technical charts view a reading of more than 70 as a signal that the price may soon drop. “Gold is going to fall under its own weight,” said Tom Hartmann, an analyst with AltaVista Worldwide Trading Inc. in Mission Viejo, California. “There aren’t a lot of people out there who have been short on gold.” Price Outlook Bullion will gain next week, according to 19 of 24 traders, investors and analysts surveyed by Bloomberg before today. Five forecast lower prices. The metal is headed for a 0.5 percent decline this week, halting four straight gains. “I wouldn’t be surprised if people see this as a bargain- buying opportunity,” said LaSalle’s Zeman. The metal has rallied on news that central banks including India and Russia increased their gold holdings and on speculation that governments, the biggest bullion holders, will make more purchases. “It is a bull market, and in bull markets one buys weakness when weakness avails itself,” economist Dennis Gartman told clients in his Gartman Letter today. He said he’d buy if the metal trades below $1,200 by a few dollars. Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, increased for a fourth straight day, adding 0.3 metric ton to 1,131.49 tons yesterday, according to the company’s Web site. The fund’s holdings reached a record 1,134 tons on June 1. Among other precious metals in New York, silver futures for March delivery fell 62.3 cents, or 3.3 percent, to $18.505 an ounce. A close at that price would pare the week’s gain for the most-active contract to 0.9 percent. To contact the reporters on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net; Nicholas Larkin at nlarkin1@bloomberg.net.

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