Gold slides below $1200 on firmer dollar

The shiny metal slipped on Wednesday as the dollar rose for the third day against majors, except the yen, which damped demand on gold as an alternative investment.

The dollar index, which tracks the dollar movements versus a basket of major currencies, climbed to 81.49 from yesterday's closing of 80.89.

The U.S. dollar touched a high of 81.51 the previous day after the Fed downbeat announcements which raised concerns in markets causing investors to resort to lower-yielding assets and safe havens.

Ben Bernanke, the chairman of the Federal Reserve, said the Fed would continue buying bonds to boost growth after the slowdown witnessed in the second quarter. Now, many analysts expect the Fed to keep interest rate near zero till the middle of 2011, while others predict the U.S. to fall in double-dip recession next year.

Although the Fed announcement gave support to the dollar, gold yesterday added $2.60 or 0.22% to close at $1204.02 an ounce, while gold Price was setin London on Tuesday at $1192.50 per ounce during the PM fixing declining from $1196.75 during the AM fixing.

Precious-Gold advance yesterday as keeping interest rate low and buying bonds by the Fed spurred demand on gold as a hedge against inflation. Later on today, BoE will release its quarterly inflation report which will include new growth and inflation projections.

Yet, the metal still moves around $1200 critical level as it failed to stay above it dropping to $1197.68 an ounce today after posting a high of $1204.65 and a low of $1196.71.

Oil, on the other hand failed to give support to the yellow metal as it was affected by the dollar's rise and drop in Asian stocks.

Among other precious metals, platinum slid to $1537.30 from $1549.20 on Tuesday; palladium fell to $472.10 from $475.75; and silver retreated to $18.17 from $18.29, as of 08:50 GMT.