Gold, little changed, may decline as further signs of an economic recovery in the U.S. and mounting concern about European sovereign debt boost the dollar, hurting demand for the metal as an alternative asset. Immediate-delivery bullion traded at $1,381.18 an ounce at 2:37 p.m. in Seoul. Gold lost 1.1 percent to $1,380.82 yesterday, the lowest close since Nov. 29, as the dollar gained. The February-delivery contract fell 0.3 percent to $1,381.80 an ounce on the Comex in New York. “There’s no doubt that the strengthening dollar is having an effect on commodities markets generally,” Ben Westmore, an analyst at National Australia Bank Ltd., said today by phone from Melbourne. “We would expect to see some weakness in gold prices in the next few days.” The greenback was little changed against a basket of six other currencies today after rising by the most in three weeks yesterday. The U.S. consumer-price index increased 0.1 percent in November, according to data yesterday, while industrial output rose 0.4 percent, more than expected. The Federal Reserve this week kept its benchmark interest rate at zero percent to 0.25 percent and maintained it will continue a plan to buy back $600 billion in bonds. U.S. housing starts rose to an annual rate of 550,000 in November from 519,000 in October, according to the median estimate of economists in a Bloomberg News survey before data today. ‘U.S. Recovery’ “The U.S. economic outlook looks rather good, while the overall global market remains in a risk-off mode,” said Kuniyuki Hirai, manager of foreign-exchange trading at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s largest lender. “The dollar is benefiting as a safe haven, and expectations about the U.S. recovery are also helping.” European governments are struggling to stop contagion spreading from Greece and Ireland to the rest of the euro region. Moody’s Investors Service said on Dec. 15 it may lower Spain’s Aa1 rating less than three months after a previous cut. Gold has gained 26 percent this year, reaching a record $1,431.25 an ounce on Dec. 7. Silver for immediate delivery gained 0.7 percent to $28.9925 an ounce after yesterday dropping 2.3 percent, the biggest decline since Dec. 7. Cash palladium lost 0.3 percent to $748 an ounce and immediate-delivery platinum was also 0.3 percent lower at $1,693.20 an ounce. To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net. To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

Source