Gold fell in London on speculation that demand from investors stalled and as a drop in oil prices diminished the attraction of the metal as a hedge against inflation. Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, reached a record of almost 1,128 metric tons last month and shrank 2.1 percent since then. Crude fell from a six-month high in New York trading. “The next move is most likely to be down,” said Matthew Turner, an analyst at VM Group in London. “The ETF purchases have dried up and it has been a bit overextended.” Gold for immediate delivery fell $5.31, or 0.6 percent, to $911.34 an ounce at 12:33 p.m. in London, retreating from a 3.4 percent advance last week. Futures for June declined $3.40, or 0.4 percent, to $911.50 an ounce on the Comex division of the New York Mercantile Exchange. “People’s perception of risk, particularly among the banking sector, has diminished and a lot of uncertainty, that has been dominating the market, is gone for the time being,” said Tom Kendall, a precious-metals strategist at Mitsubishi Corp. in London. Gold also fell as the dollar strengthened. The U.S. Dollar Index, which tracks the currency against the euro and five other monies, advanced 0.3 percent, diminishing the appeal of the metal as an alternative investment. Crude oil dropped as much as 2.7 percent, after gaining 10 percent last week. “Inflation is going to happen, with all the injections that are going on right now into the financial world,” Afshin Nabavi, senior vice president at bullion refiner MKS Finance SA in Geneva, said by phone. Bullion May Rally Bullion may rally later this year, said Tobias Merath, head of commodity research at Credit Suisse Group. “Gold has hit a bottom and is on its way up,” Merath said in a Bloomberg Television interview today. “It won’t be easy to break the $1,000 mark, we think that could happen in the early part of the third quarter, because the third quarter is also usually the part of the year where gold prices do best.” Among other precious metals for immediate delivery, silver dropped 1 percent to $13.865 an ounce. Platinum in ETF Securities Ltd.’s exchange-traded commodities dropped 5.7 percent since May 5 to 316,582 ounces on May 8, according to the company’s Web site. Palladium assets added 0.7 percent to 280,149 ounces in the period. Gold and silver investments were little changed. Platinum lost 1.1 percent to $1,138 an ounce and palladium fell 1.5 percent to $238 an ounce. “Automotive demand makes up around 55 percent of total platinum demand,” Lonmin Plc, the third-largest platinum producer, said in a statement today. “We anticipate ongoing short-term weakness in the sector and we are not planning for any significant recovery in platinum-group-metal prices in the next 12 months.”

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