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Gold futures fall over 3% as dollar rallies

By Polya Lesova, MarketWatch

Last Update: 10:43 AM ET Apr 18, 2008

NEW YORK (MarketWatch) — Gold futures fell sharply Friday, as a rise in the U.S.
dollar and a decline in oil prices pressured investment demand for the precious
metal.

Gold for June delivery dropped $30.10, or over 3%, to $912.80 an ounce on the New
York Mercantile Exchange.

“The flight-to-quality trade is flying out of gold and back to stocks,” said
Zachary Oxman, a senior trader at Wisdom Financial.

“We’ve had two days of an extremely strong stock condition and a very negative
bond market,” Oxman said. “Today, the money is flying out of safe-haven plays
back into risk and back into the dollar.”

On Wall Street, U.S. stocks rallied, as investors cheered the fact that Citigroup
Inc.’s writedowns were not as bad as feared, along with stronger-than-expected
results from Internet-search giant Google Inc. See Market Snapshot.
Click for Detail

Citigroup (C), the largest U.S. bank, reported a $5.1 billion quarterly loss and
said it would take more than $6 billion in pre-tax writedowns and billions in
other downward adjustments as it continues to unwind the wreckage left by the
subprime debacle. Read more about Citigroup.
Click for Detail

The dollar soared against most major counterparts, surging against the yen as
improved earnings and stock market gains whetted investors’ risk appetite.

The dollar index, which tracks the performance of the greenback against a basket
of other major currencies, rose 1% at 72.28. See Currencies.
Click for Detail

“It is all about risk appetite, which started on a high note following solid
earnings including Google,” wrote Ashraf Laidi, chief foreign exchange strategist
at CMC Markets US. “Risk appetite escalated immediately after the 6.30 am EST
release of Citigroup’s earnings, which albeit worse than expected, managed to
trigger sharp yen selling across the board.”

On Thursday, gold futures fell $5.40 to end at $942.90 an ounce.

Crude-oil futures fell, as a rally in the greenback weighed on dollar-denominated
oil prices, which have hit a series of record highs this week.

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