By Glenys Sim and Nicholas Larkin Jan. 20 (Bloomberg) -- Gold dropped for the first time in three days in London as a stronger dollar eroded demand for the precious metal as a store of value. Platinum declined from a 17- month high. The U.S. Dollar Index, a six-currency gauge of the strength of the greenback, rose as much as 0.7 percent on concern Greece’s fiscal problems will slow an economic recovery in the euro zone. Gold typically moves inversely to the dollar, which climbed to a five-month high against the euro. “The dollar strengthening is the main reason for the lower gold price,” said Wolfgang Wrzesniok-Rossbach, head of sales and marketing at Hanau, Germany-based Heraeus Metallhandels GmbH. “For jewelry and physical demand, it’s probably higher prices that’s keeping fresh purchases relatively low.” Gold for immediate delivery lost $6.38, or 0.6 percent, to $1,131.82 an ounce at 9:07 a.m. local time. Bullion for February delivery was 0.7 percent lower at $1,131.80 on the New York Mercantile Exchange’s Comex division. The dollar index is little changed this year after a 4.2 percent drop in 2009. The currency slumped last year as the Federal Reserve held interest rates near zero to revive the U.S. economy and investors favored higher-yielding currencies and assets on expectations of a recovery from the world recession. Investor Interest “Gold continues to trade off the greenback,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in an e- mail. Bullion has been “gradually decoupling” from other precious metals, with its performance against platinum group metals reflecting “weakening investor interest” in gold at the moment, he added. Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, declined 0.91 metric ton to 1,111.92 tons yesterday, according to the company’s Web site. Platinum for immediate delivery fell 0.4 percent to $1,638.05 an ounce, erasing a gain of as much as 0.7 percent to a 17-month high of $1,657.38. Interest in new ETFs is moving the metal further away from the industrial and jewelry markets, according to Standard Bank Ltd. Platinum, used in catalytic converters that reduce exhaust fumes from cars, has risen 4 percent since Jan. 8, when ETFS Platinum Trust and ETFS Palladium Trust started trading on the NYSE Arca stock exchange. “The platinum market appears tighter than it has been for a long time,” Standard Bank analyst Walter de Wet said in an e- mail. “While prices can’t rise forever and there will be a supply response, it is likely to be slower than the current rise in investment demand.” One ounce of platinum now costs about $506 more than an ounce of gold, a spread last seen when Lehman Brothers Holdings Inc. filed for bankruptcy in September 2008. Platinum prices briefly fell below gold for the first time in 12 years in December 2008. Among other precious metals for immediate delivery in London, silver fell 0.9 percent to $18.585 an ounce. Palladium declined 1.5 percent to $459.38 an ounce after five advances in a row. To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

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