Gold prices fell Wednesday after favorable economic news helped boost the greenback. Contracts for February delivery closed down $1.60 at $613.40 on the Comex division of the New York Mercantile Exchange. The recently launched Powershares DB Gold exchange-traded fund ( DGL) was off about 0.1%. The bullion ETFs, streetTracks Gold Shares ( GLD) and iShares Comex Gold Trust ( IAU), both were down about 0.3%. "The story today was the stronger U.S. dollar," says Bernard Hunter, director of precious metals at Toronto-based bullion bank ScotiaMocatta. Prices for gold tend to head lower as the dollar moves up in value. "But there has been some good physical demand on the drops, and that has stopped
gold falling too far," Hunter adds. Sparking the dollar rally was a Commerce Department report that the November trade deficit unexpectedly narrowed from October. The November trade deficit totaled $58.2 billion, down from a revised October figure of $58.8 billion. Economists had expected the deficit to swell to $59.5 billion. The news was enough to help bolster the U.S. currency. One euro would recently buy $1.2936, down from $1.30 late Tuesday. Elsewhere, the U.S. dollar was recently buying 119.63 yen, up from 119.4 yen previously. Despite the day's gold drop, one economic bull took a longer-term prospective and forecast a surge in the metal's prices.
Demand for gold from Asian central banks will take the spot gold price above its all-time high of $825 reached in 1980, says Vinay Pande, chief investment advisor at Deutsche Bank in New York. Such institutions currently have very low allocations of gold and are likely to start diversifying into the yellow metal. Pande urges investors to buy gold as a hedge against the inevitable long-term decline in the value of major currencies, such as the dollar and euro. The Market Vectors Gold Miner ETF ( GDX), which tracks a basket of precious-metals stocks, was losing 1% in recent action. Turning to the base metals, March copper closed up 11 cents at $2.66 a pound on the Comex amid continued short-covering. "I think any additional strength will be used as a selling opportunity," says Peter Grandich, editor of The Grandich Letter. "The fundamentals have changed dramatically
from a few months ago . Eventually the price will be around $2 a pound." Shares of producer companies were gaining on the back of the metal strength. Southern Copper ( PCU) was up 1.8%, while Freeport-McMoRan ( FCX) was up 2.3%. Elsewhere, aluminum giant Alcoa ( AA) was rallying 6% after reporting better-than-expected fourth-quarter results after Tuesday's close.