Cash gold fell as much 0.3 percent to $1,610.70 an ounce, and traded at $1,612.35 at 9:53 a.m. in Singapore. Holdings in bullion-backed exchange-traded funds, which reached an all-time high of 2,360.810 metric tons on Dec. 14, fell for a fifth day to a one-month low of 2,329.921 tons yesterday, data compiled by Bloomberg show. The February-delivery contract was little changed at $1,614.10 an ounce on the Comex in New York.

The dollar traded near an 11-month high against the euro after European banks borrowed a record 489 billion euros ($638 billion) from the ECB yesterday, more than economists’ median estimate of 293 billion euros in a Bloomberg News survey. The U.S. currency also strengthened before reports that may show confidence and spending among U.S. consumers gained.

“A recently stronger U.S. dollar against the euro disappointment that the ECB has not mounted a more aggressive purchase program for the bonds of more highly indebted euro-zone countries and lack of further Fed measures have recently pressured gold prices,” Patricia Mohr, an economist and commodity-market specialist at Scotia Capital, wrote in a report.

Gold, up 13.5 percent this year, is still set to recover from its worst week in almost three months. Prices dropped 6.6 percent last week, and touched $1,560.97 on Dec. 15, the lowest price since Sept. 26, after the Federal Reserve refrained from taking new action to boost economic growth.

Spot silver fell for a second day, losing as much as 0.6 percent to $29.22 an ounce. It last traded at $29.28 an ounce, 5.3 percent lower in 2011.

Cash platinum retreated for a second day, dropping 0.5 percent to $1,421.50 an ounce, extending this year’s loss to 20 percent. Palladium, down 21 percent this year, declined for the first day in three, falling 0.6 percent to $631 an ounce.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

http://www.bloomberg.com/news/2011-12-22/gold-drops-as-demand-for-ecb-bank-lending-program-strengthens-the-dollar.html

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