Bullion slid 0.8 percent last week as the dollar index, which tracks the greenback against six major currencies, gained 0.6 percent and oil slumped 3.5 percent. Gold is typically seen as a hedge against accelerating consumer prices and an alternative to a depreciating currency.
“Gold’s been stuck in the $900-$950 range for a while, driven by the performance of the dollar and demand for a safe haven,” said Zhu Lv, research manager at Shanghai Tonglian Futures Co. “Longer term inflationary expectations will keep it above $900.”
Gold for immediate delivery dropped 0.4 percent to $928.82 an ounce at 9:13 a.m. in Singapore. The dollar index was little changed after rising as much as 0.2 percent earlier, while crude slid 2.3 percent to $65.20 a barrel.
Still, gold’s losses may be limited as investors raise their allocations of the precious metal for the third quarter. Eighteen of 31 traders, investors and analysts surveyed by Bloomberg News, or 58 percent, said bullion would gain this week. Eight people forecast lower prices and five were neutral.
“While gold has been knocked back from its recent high, we believe that prices will still trend higher through the remainder of this year,” David Barclay, commodity strategist at Standard Chartered Plc, said in a monthly report.
“Gold’s correlation with the U.S. dollar has become closer in recent weeks, and a substantially weaker U.S. dollar in the second half of 2009 still underpins our view,” said Barclay, who forecasts gold to average $975 an ounce in the third quarter and $1,050 an ounce in the fourth quarter of this year.
Among other precious metals for immediate delivery, silver dropped 0.5 percent to $13.3325 an ounce, platinum declined 0.5 percent to $1,176 and palladium slid 1.1 percent to $245 an ounce as of 9:15 a.m. in Singapore.