Gold dropped in Asia as a slide in equities renewed deflationary concerns and a rally in the US dollar curbed the metal's appeal as an alternative investment.
The Dow Jones Industrial Average had its worst Inauguration Day decline yesterday as speculation banks must raise more capital sent financial shares to an almost 14-year low. Bullion has fallen 3.5% this year as the index slid 9.4%.
``It's deflation right now,'' said Tetsuya Yoshii, vice president for derivative products at Mizuho Corporate Bank Ltd. Still, ``people are looking to park their money somewhere and equities is not the answer, so those not wanting to hold cash will keep gold in the $US750 to $US850 range for a while.''
Bullion for immediate delivery fell as much as 1% to $US848.41 an ounce, and recently traded at $US851.90 in Singapore. Gold for February delivery was down 0.5% at $US850.80 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.
``It seems people are getting quite comfortable with this level,'' said Yoshii. ``It may go above $US850 during this turmoil but I think it will face selling pressure over $US900.''
The dollar advanced to a six-week high against the euro before a German producer prices report that may give the European Central Bank more scope to lower borrowing costs. The dollar last traded at $US1.2945 compared with $US1.2904 late yesterday.
Barack Obama became the 44th US president yesterday, inheriting the most severe economic crisis since Franklin D. Roosevelt was sworn in 76 years ago. The Dow's 4% slide to 7,949.09 was the most on an Inauguration Day in the measure's 112-year history, according to data compiled by Bloomberg and the Stock Trader's Almanac.
Among other precious metals for immediate delivery, silver gained 0.3% to $US11.215 and palladium declined 0.1% to $US184.5 an ounce, while platinum gained 0.7% to $US946.50 an ounce in Singapore.
