Gold Falls for First Day in Six as Crude Oil Drops Below $140

By Feiwen Rong

July 16 (Bloomberg) -- Gold fell for the first time in six days as crude oil's tumble to below $140 a barrel yesterday eroded the appeal of the metal as a hedge against inflation.

Oil in New York traded at $138.68 a barrel at 10:56 a.m. in Singapore, after dropping as much as $9.26 to $135.92 yesterday because of concern a slower U.S. economy will curtail demand. Gold has added 17 percent this year and oil has gained 44 percent.

``A $9 fall in the price of oil saw widespread profit- taking'' in the gold market, David Thurtell, analyst at BNP Paribas SA in London, wrote in a report yesterday.

Bullion for immediate delivery traded 0.6 percent lower at $972.05 an ounce at 10:52 a.m. in Singapore. The metal fell to as low as $969.21 an ounce yesterday in New York from an almost four-month high of $988.02. Silver lost 0.5 percent to $18.8350 an ounce.

Still, ``gold could firm on renewed worries about the U.S. financial system and a sick U.S. dollar,'' Mark Pervan, analyst at Australia and New Zealand Banking Group Ltd. in Melbourne, wrote in a report yesterday.

The dollar traded at $1.5905 against the euro at 10:43 a.m. in Singapore, after falling to a record low at $1.6038 yesterday, amid speculation that U.S. banks will report further losses this week, eroding confidence in the financial system of the world's largest economy.

Gold for August delivery lost 0.6 percent to $972.70 an ounce in after-hours electronic trading on Comex at 10:45 a.m. in Hong Kong. Gold for December delivery traded in Shanghai fell 0.6 percent to 211.98 yuan a gram ($968 an ounce) at the same time.

Gold for June 2009 delivery dropped 1.1 percent to 3,301 yen a gram ($981 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break, after reaching a 25-year high of 3,346 yen yesterday.

To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net