By Pham-Duy Nguyen Oct. 21 (Bloomberg) -- Gold fell for the first time this week on speculation that the dollar’s decline will stall, eroding the appeal of the metal as an alternative asset. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fluctuated from gains to losses today after rebounding yesterday from a 14-month low. Before today, gold advanced 20 percent this year in New York as the dollar index retreated 7.1 percent. “Gold’s rally is really dependent on the dollar,” said Matt Zeman, a LaSalle Futures Group Inc. metals trader in Chicago. “If the dollar does stop hemorrhaging, that’s going to spell absolute doom for gold.” Gold futures for December delivery dropped $2.80, or 0.3 percent, to $1,055.80 an ounce at 9:52 a.m. on the New York Mercantile Exchange’s Comex division. The metal reached a record $1,072 on Oct. 14. Holdings of gold in exchange-traded products of ETF Securities Ltd. fell to 7.99 million ounces yesterday from 8.1 million ounces on Oct. 19, the company indicated today on its Web site. Gold held by the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, was unchanged at 1,109.31 metric tons as of Oct. 20. “There’s no buying interest up here,” Zeman said. “If gold is no longer moving higher, people are going to get itchy fingers and get out.” Record Longs Hedge funds and other large speculators are holding a record net-long position, or bets on higher prices, in U.S. gold futures, data from the Commodity Futures Trading Commission show. The biggest bet among options traders is for gold to reach $1,200 by December. “Most commodities are trading at overbought levels,” said Tom Pawlicki, an MF Global Inc. analyst in Chicago. A drop in prices would “give us the opportunity to re-enter the market from the long side,” he said. Silver for December delivery declined 1.3 cents to $17.545 an ounce on the Comex. Before today, the metal had gained 55 percent this year.

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