By Pham-Duy Nguyen Nov. 18 (Bloomberg) -- Gold and silver fell for the second straight day on speculation that the slumping global economy will reduce demand for commodities, eroding the appeal of the precious metals as a hedge against inflation. Prices paid to U.S. producers tumbled in October by the most on record, the Labor Department said today. The Reuters/Jefferies CRB Index of 19 raw materials is down 32 percent this year, and gold is headed for its first annual decline in eight years. ``The prospect that the economy is to weaken into 2009 will continue to keep commodity prices under wraps, including metals,'' said Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago. ``As long as you don't have the demand chasing goods, the wiping out of inflationary expectations is inevitable.'' Gold futures for December delivery declined $7.20, or 1 percent, to $734.80 an ounce at 9:33 a.m. on the Comex division of the New York Mercantile Exchange. Silver futures for December delivery dropped 4.5 cents, or 0.5 percent, to $9.285 an ounce. Platinum futures for January delivery rose $3.40, or 0.4 percent, to $824 an ounce on the Nymex. Palladium for December delivery fell $1.70, or 0.8 percent, to $216 an ounce. Lonmin Plc, the world's third-largest platinum producer, will cut at least 50,000 ounces of annual output, halt expansion and eliminate a third of jobs at its London headquarters. Before today, platinum plunged 64 percent from a record $2,308.80 on March 4. To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

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