Gold Heads for Longest Slump in Three Months

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"A stronger dollar curbed the appeal of precious metals."

Gold prices fell for a third day, heading for the longest slump since mid-September, as a stronger dollar curbed the appeal of precious metals as alternative assets.

The greenback added as much as 0.5% against a basket of six major currencies as concern that Europe's fiscal woes will continue to spread across the region boosted the appeal of U.S. assets. Gold touched a record $1,432.50 an ounce on Dec. 7 amid speculation that government spending and record low interest rates would debase the dollar.

Gold futures for February delivery lost $2, or 0.1%, to $1,369 at 11:225 a.m. on the Comex in New York. A close at that level would leave the price down 1.1% this week, a second straight drop.

In 2010, futures have surged 25%, heading for the 10th straight annual gain, amid record investment in exchange- traded funds backed by physical metal.

"When gold dips, people will come in and buy it," said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. "But gold has to give a portion back after this year's rally, so over the next two weeks, gold is going to be vulnerable to year-end liquidation."

Irish government bonds declined after Moody's Investors Service Cut Ireland's credit rating. The Federal Reserve this week maintained a plan to buy back $600 billion in bonds to bolster the economy. The U.S.'s benchmark lending rate has been at zero to 0.25% for two years.

"The Fed has kept open the door to more bond purchases, and the eurozone debt crisis is heating up again, Zeman said. "That will keep a nice floor under gold prices."

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