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Falling Dollar No Help for Gold

December futures slip 90 cents to $603.30 an ounce.

Gold dipped Monday as lending activity out of Europe overcame the bullish effects of a weaker U.S. dollar, observers say.

"I think that if you look at what's been happening recently is that prices have been knocked down while London is open,"says Neal Ryan, director of economic research at the New Orleans-based coin dealer Blanchard. "That's where the vast majority of leasing activity is located."

Benchmark contracts for December delivery of gold closed 90 cents lower at $603.30 an ounce on the Comex division of the New York Mercantile Exchange.

Shares of the exchange-traded funds that hold the metal,

iShares Comex Gold Trust

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streetTRACKS Gold Shares

(GLD) - Get SPDR Gold Shares Report

, followed suit, down 0.2% by late afternoon.

The downward move in gold was likely moderated by changes in the price of the U.S. dollar, which weakened after the Institute for Supply Management reported figures showing its manufacturing index fell to 52.9. That compares with expectations of 53.5 and an August figure of 54.5. The information provides further evidence of a cooling U.S. economy.

Currency dealers reacted to the news by marking down the dollar, which was recently buying 117.59 yen, down from 118.12 yen late Friday. It was also weaker against the euro, trading at $1.2748 vs. $1.2681 previously. Bullion prices tend to move in the opposite direction of the greenback.

In the mining patch, the Amex Gold Bugs index was moving up 1.5%, buoyed by

Harmony Gold

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Gold Fields

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, each up more than 4% recently.

Shares of



were bucking the trend, falling about 1%.

Among the majors,

Newmont Mining

(NEM) - Get Newmont Corporation Report

was rallying 1.1%, while

Freeport-McMoRan Copper & Gold

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was up 0.8%.

As for the base metals, copper was hit by the weaker-than-expected economic data, with contracts for December delivery shedding 3.10 cents to close at $3.4295 a pound on the Comex.

The decline came despite another economic report showing August construction spending rose by 0.3% vs. an expected decline. Copper demand is sensitive to changes in economic activity, particularly the housing market.

However, investors were unfazed, and shares in miners

Phelps Dodge

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Southern Copper


were both rallying, up 0.6% and 1.6%, respectively.