Gold fell in London as crude oil slumped and the US dollar gained against the euro, reducing the metal's appeal as an inflation hedge and alternative investment.
Oil declined on Monday on forecasts faltering global economic growth will drive down fuel demand, while the dollar rose as much as 1.2% against the euro. Bullion, which typically moves in the opposite direction to the US currency, climbed 3.1% on Jan. 16, the biggest gain in more than a month.
Gold is ``still moving with oil and the dollar and it depends on what's going on in these markets,'' Wolfgang Wrzesniok- Rossbach, head of marketing and sales at Hanau, Germany-based Heraeus Metallhandels GmbH, said by phone. Trading volume will be low today because of the Martin Luther King Day holiday in the US, he said.
Gold for immediate delivery lost as much as $US10.70, or 1.3%, to $US832.45 an ounce and traded at $US838.82 an ounce in London. February futures were 0.2% lower at $US838.40 in electronic trading on the Comex division of the New York Mercantile Exchange.
The metal rose to $US842.50 an ounce in the morning ``fixing'' in London, used by some mining companies to sell production, from $US833.75 at the afternoon fixing on Jan. 16.
Crude oil slipped as much as 7.2% to $US33.89 a barrel in New York.
``Some profit taking has been evident,'' James Moore, an analyst at TheBullionDesk.com in London, wrote today in a note. ``We remain bullish towards gold from both a fundamental view and belief investors will look to further diversify their portfolios, again turning towards the safe-haven assets.''
Gold survey
Prices may rise this week on speculation that the dollar will slide, according to 18 out of 32 traders, investors and analysts surveyed from Mumbai to Chicago last week. Ten advised selling, and four were neutral.
Standard Bank Ltd. forecast gold may drop to $US750 an ounce this quarter as jewelry demand falls and the dollar remains strong against other currencies. The commodity will then rebound and average $US910 an ounce for the year as the US currency weakens, the bank said.
Investment in Zuercher Kantonalbank's gold exchange-traded fund rose to a record 3.264 million ounces last week from 3.217 million ounces, the bank said today. ETF Securities Ltd. said it has $US4.8 billion in gold assets under management, up 55% in the past year. Bullion trading more than tripled last year to $US14.5 billion, it said.
``Where investors are worried about credit risk, interest rates are extremely low, and governments are reflating and building up debt aggressively, gold is proving to be a popular investment,'' ETF Securities said today in the report.
Silver slips
Among other metals for immediate delivery in London, silver declined 0.8% to $US11.185 an ounce. Platinum gained $US5.50, or 0.6%, to $US954.50 an ounce, and palladium was 0.9% lower at $US183.75 an ounce.
``With auto sales under pressure, demand for platinum should also decline in 2009, which may be exacerbated by jewelry demand and other industrial demand that could also show a fall this year,'' Standard Bank analyst Walter de Wet wrote.
``Although there are some production closures in South Africa, we doubt it would be enough to offset the fall in demand.''
Automakers account for about half of global platinum and palladium consumption.
