BLBG: Gold May Drop in London on Cheaper Crude Oil, Dollar Outlook
By Nicholas Larkin
Nov. 4 (Bloomberg) -- Gold, little changed today in London, may decline as crude oil drops and on expectations the dollar will strengthen, diminishing the metal's appeal as a hedge against inflation and a weaker U.S. currency.
Oil slipped for a second day after a report showed manufacturing in the U.S. contracted in October at the fastest pace in 26 years, signaling weaker fuel demand. The dollar, which rose against the euro the previous three days, was little changed after earlier rising as much as 0.9 percent.
``In the short term there is selling pressure on gold'' as oil and commodities decline, Liran Kapeluto, a senior dealer at trading-system operator Finotec Trading U.K. Ltd., said by phone from London. Bullion prices may drop in the next several days ``as tightening of the dollar may continue,'' he said.
Gold for immediate delivery added $4.96, or 0.7 percent, to $728.41 an ounce as of 9:40 a.m. in London. Futures for December were $1.60, or 0.2 percent, higher at $728.40 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange.
The dollar has climbed on speculation the European Central Bank will lower interest rates to cushion the impact of a slowing economy. ECB and Bank of England policy makers meet Nov. 6, when they will probably reduce interest rates a half point, according to Bloomberg surveys.
Crude oil dropped 2.1 percent to $62.55 a barrel on the New York Mercantile Exchange today.
Gold in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, held steady at 749.2 metric tons yesterday, according to figures posted on the company's Web site.
Among other metals for immediate delivery, silver fell 6 cents, or 0.6 percent, to $9.78 an ounce. Platinum added $3, or 0.4 percent, to $823 and palladium was unchanged at $200.50 an ounce. Platinum and palladium are used in autocatalysts.
Bayerische Motoren Werke AG, the world's largest maker of luxury cars, lowered its earnings outlook for the second time this year and Japan's Honda Motor Co. cut its 2008 U.S. sales forecast by 4.1 percent because of the faltering economy.
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net
