Price of gold heads back under $1550 an ounce as higher US dollar caps gains

The price of gold headed back under $1550 an ounce the first time in three days in London on speculation that Europe’s debt crisis will drive investors fleeing back to the US dollar, curbing demand for the precious metal as an alternative asset.

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Gold futures were trading in the range of $1,569 to $1,583 on Monday, higher than last week’s close, however today’s rate is back at $1548.75 an ounce. Prices are 5.4% lower in May for a fourth monthly decline, the longest losing run since 1999. August-delivery futures were 0.3% higher at $1,576.20 on the Comex in New York.

The rising dollar kept pressure on commodities priced in the US currency. The US dollar traded near a 22 month high versus the euro on Wednesday as concern that Europe’s turmoil is hurting economic growth boosted demand for the greenback.

“In view of the latest negative news from the euro zone, the US currency is likely to gain further against the euro, which should prevent any rise in the price of gold,” analysts at Commerzbank AG wrote on Tuesday in a report. “Weak physical demand has also been weighing on the price of gold recently.”

Silver for immediate delivery fell 0.5 % to $28.2575 an ounce. Palladium was little changed at $605.13 an ounce. Platinum was 0.2% lower at $1,436 an ounce. Platinum will average $1,750 in the fourth quarter, the median of 13 analyst estimates compiled by Bloomberg shows, as the first drop in mine supply in four years and record car sales reduce a surplus.

Gold is still up 0.8 percent this year as investors joined central banks in buying the metal to diversify their assets.

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Price of gold heads back under $1550 an ounce as higher US dollar caps gains