MW: Gold falls more than 2%, extends recent loss, as dollar gains
By Polya Lesova, MarketWatch
FRANKFURT (MarketWatch) -- Gold futures fell more than 2% on Monday, extending their sharp losses, as the U.S. dollar rose against its major rivals, reducing the appeal of bullion as a hedge against the currency's depreciation.
Gold for December delivery dropped $28.80, or 2.5%, to $1,140 an ounce in electronic trading on Globex.
Earlier, the metal hit an intraday low of $1,138.40 an ounce.
Gold extended steep losses that started on Friday, when the dollar rallied in reaction to much better-than-expected U.S. jobs data.
The Labor Department said the economy shed 11,000 jobs last month, a fraction of what analysts anticipated. The unemployment rate also unexpectedly declined.
The data fueled expectations of a strong U.S. recovery that may prompt the Federal Reserve to lift rates earlier than some observers had forecast.
"While we think that the current year-end rally can resume in the coming days, Friday's developments illustrate the potential impact of a longer-term bottoming in real interest rates on gold prices," wrote analysts at Credit Suisse in a note to clients.
"This is one of the main risks for precious metals next year and is why we expect some headwinds for gold in the first quarter of 2010," they said.
On Friday, as the dollar surged, gold futures slumped $48.60, or 4%, erasing their weekly gains.
Gold's recent decline comes after the metal repeatedly set records. Last Thursday, the metal surged to a high of $1,226.40 an ounce.
Gold and the dollar have had a strong inverse relationship. The metal tends to fall when the dollar rises. The greenback's strength gives investors fewer reasons to buy hard assets that will hold value when paper currencies depreciate.
In recent trading, the dollar index (DXY 75.96, +0.27, +0.36%) , which measures the greenback's performance against a trade-weighted basket of six major currencies, rose to 76.086 from 75.819 in late North American trading on Friday.
Other metals also posted losses on Monday. Silver futures fell 49 cents, or 2.6%, to $18.01 an ounce.
January platinum futures dropped $22.40, or 1.6%, to $1,427.30 an ounce.
March copper futures fell 8 cents, or 2.3%, to $3.16 a pound.
