Goldman Sachs assigns buy ratings to Gold Fields and Harmony Gold By Polya Lesova, MarketWatch FRANKFURT (MarketWatch) -- Gold futures dropped in thin trading on Wednesday, as economic-recovery expectations continued to bolster the U.S. dollar, leading traders to sell the precious metal. Gold for December delivery fell $6, or 0.6%, to $1,080 an ounce in electronic trading on Globex. The front-month contract expires on Dec. 29. February gold, the most actively traded contract, dropped $4.50 to $1,082.20 an ounce. "Trade has been thinner than normal overnight, with Japanese players absent for a national holiday," said James Moore, an analyst at TheBullionDesk.com, in a note to clients. "In the run-up to year-end, we expect gold to see further pockets of long liquidation, potentially pulling back to the $1,050 area," Moore said. The stronger dollar makes gold and silver vulnerable to selling pressure, he said. The dollar index (DXY 78.28, +0.03, +0.04%) , a measure of the greenback against a trade-weighted basket of major currencies, was at 78.224 in recent trading, compared with 78.245 late Tuesday. Gold futures fell on Tuesday to the lowest level in seven weeks as upbeat U.S. home-sales data lifted the dollar, reducing the metal's investment appeal. Gold Fields, Harmony Gold rated buy Goldman Sachs on Wednesday initiated coverage of South Africa-based Gold Fields (GFI 13.14, +0.01, +0.08%) (ZA:GFI 10,190, +11.00, +0.11%) with a buy rating and it also upgraded Harmony Gold Mining (HMY 9.83, +0.02, +0.20%) (ZA:HAR 7,649, +70.00, +0.92%) to buy from neutral. "Harmony and Gold Fields have a high exposure to South African gold production, as well as the highest level of operational gearing," Goldman analysts said in a note. "This suggests that they will see the largest benefits from a combination of rising U.S. dollar [denominated] gold prices and a weakening South African rand over the next two years," they said. Goldman initiated AngloGold Ashanti (AU 40.30, -0.15, -0.37%) (ZA:ANG 30,750, -155.00, -0.50%) with a neutral rating, saying that the miner's substantial hedge-book restructuring means it now has much greater gold-price exposure. However, AngloGold doesn't benefit from a weakening rand to the same extent as Gold Fields and Harmony Gold. Goldman also downgraded Randgold Resources Ltd. (GOLD 80.07, +0.51, +0.64%) to neutral from buy, saying that the company's growth prospects are now priced in. Gold prices are expected to average $1,261 an ounce in 2010 and $1,425 an ounce in 2011, according to Goldman. "Combined with expected [exchange-traded-fund] inflows and likely net buying by central banks, we expect gold demand to support gold prices above the levels implied by real U.S. interest rates," the broker said.

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