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Gold falls for a third day on speculation dollar will advance

Gold fell in London for a third consecutive trading session on speculation the dollar will climb against other major currencies, diminishing the metal's appeal as an alternative investment.

The dollar, little changed today, may gain on speculation US wholesale prices accelerated and Federal Reserve members will say they're concerned about inflation, suggesting interest rates won't fall in coming months. Gold typically trades in the opposite direction of the US currency. It surged 23% last year while the dollar fell 11% versus the euro. „If the Fed is not moving very quickly on interest rates, then the dollar could gain and gold will lose,” Michael Widmer, director and head of metal research at Calyon in London, said in an interview today.

Gold for immediate delivery in London was down 0.4% to $622.40 an ounce as of 12:36 p.m. London time. Earlier, it gained 70 cents to $625.50 as purchases by jewelers „kept the metal underpinned,” James Moore, a precious metals analyst with, said in an e-mail. Gold is down 2% this year, after rising for six consecutive years. Jewelry demand, which makes up 67% of usage, increased to 2,712 tons in 2005, from 2,613 tons the year before, according to London-based research group GFMS Ltd. GFMS will publish its 2006 figures tomorrow.

The gold market is „directionless,” Calyon's Widmer said. „There haven't been a lot of economic data coming out recently,” he said. „A lot will depend on the news flow of the day.” Prices paid to US producers excluding food and energy rose 2% in December from a year earlier, the biggest increase since a 2.6% gain in September, according to the median estimate of 13 economists in a Bloomberg News survey. The Labor Department will release the data at 8:30 a.m. in Washington. Among other precious metals for immediate delivery in London, silver dropped 3 cents to $12.53, palladium fell 50 cents to $332.50, and platinum rose $1 to $1,139 an ounce. (Bloomberg)