Gold may decline in London as some investors sell the metal after its rally to a record yesterday and amid concerns prices may fall if U.S. lawmakers agree to raise the nation’s debt ceiling. Gold’s so-called 14-day relative strength index rose to 69.5 yesterday as it rallied to a record $1,624.07 as U.S. lawmakers remained deadlocked on how to tackle the country’s debt crisis and avert a default before an Aug. 2 deadline. President Barack Obama said the nation’s burgeoning debt levels threatened to do “serious” damage to the economy unless tackled through compromise. Some analysts who study charts view a reading above 70 as a signal that the price may be set to drop. “The metal is currently trading close to the overbought region,” UBS AG analyst Edel Tully said in an e-mailed report today. “We expect a correction in the near term.” Immediate-delivery bullion fell $2.95, or 0.2 percent, to $1,611.20 an ounce by 10:01 a.m. in London. Gold futures for December delivery were little-changed at $1,614.20 an ounce on the Comex in New York. Obama, in a televised address, called on lawmakers to cut the deficit while raising the debt ceiling with a “balanced” approach, blaming the stalemate on a group of Republicans in the House who insist on budget cuts and no tax increases. In response, House Speaker John Boehner said that the president had created a “crisis atmosphere” surrounding the debt issue. “The market is clearly very worried about the small, but undeniable risk of a U.S. default” and the growing threat of a ratings downgrade, UBS’s Tully wrote. “It is more likely that investors who go long here would be inclined to bank profits immediately, rather than run the risk of a pullback on any positive news out of Washington.” ’Deep Economic Crisis’ Obama said that a failure to get a deal risks forcing the U.S. to default on some of its obligations, which may trigger a surge in interest rates. “We would risk sparking a deep economic crisis,” Obama said. The U.S. dollar fell to a record low against the Swiss franc and slumped to a seven-week low against a six-currency basket amid the U.S. debt stalemate. Gold typically moves inversely to the greenback. ‘I’m Bearish’ “When the issues get resolved the gold price could tumble, so short term I’m bearish,” Tom Winmill, who manages the Midas Fund in New York, said on Bloomberg Television’s “Street Smart” before Obama’s address. “It could go down $100, that’s the fear premium that’s built up.” Concern a fiscal crisis in Europe that started in Greece is spreading to Italy and Spain helped drive a 7.8 percent rally in spot gold in the past month. Euro-area leaders announced last week 159 billion euros ($229 billion) of new aid for Greece, prompting Moody’s Investors Service to cut Greece’s rating yesterday as the latest rescue implies “substantial” losses for private creditors. “U.S. Congress will agree to raise the debt ceiling in advance of the Aug. 2 deadline, while the latest coordinated bailout package from the European authorities is expected to stave off the possibility of a default in the region by a large European sovereign for the time being,” Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. wrote in a report today. “As such, the upside risks to the gold price are expected to dissipate.” Mine Supply Gold is set for an 11th year of gains as demand increases amid limited mine supply. More than 200,000 South African gold miners will join coal and diamond mine workers in a strike this week after failing to reach agreement with producers over pay, the country’s National Union of Mineworkers said. The gold miners are demanding pay increases of 14 percent, the union said yesterday in a statement. South Africa accounts for about 10 percent of global gold output, according to NAB’s Westmore. Cash silver was little-changed at $40.35 an ounce. Spot platinum was little-changed at $1,785.50 an ounce while palladium gained 0.3 percent to $810.50 an ounce. To contact the reporters on this story: Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net Glenys Sim in Singapore at gsim4@bloomberg.net To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net

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