01/08/08: Gold falls as dollar rallies

The price of gold fell in trading yesterday (July 31st) as the dollar rallied against the euro.

Investors were also prompted to take risk aversive action amid worries about the US economy, Thomson Financial reports.

"The focus will be on the collapsing equity stock markets and selling of risky assets is likely to drag gold lower," Dresdner Bank consultant Peter Fertig said.

"Continued woes about the fall-out of the sub-prime mortgage crisis, fears of a global credit crunch and further failures of hedge funds are straining the nerves of investors. Liquidation of positions to cover losses also weighs on gold."

The price of spot gold dropped to $660 an ounce, with other factors aiding the slide including investors selling off gold to cover losses elsewhere.

However, in the longer term analysts are expecting the gold price to remain steady or to rise as production of the yellow metal across the world is not likely to increase quickly in the future.

Major producer Polyus Gold has announced that its own output of the metal declined by six per cent in the first six months of this year.