Gold Falls in London on Reduced Hedge Demand; Silver Also Drops

By Claudia Carpenter

July 4 (Bloomberg) -- Gold fell in London as a decline in energy costs may reduce demand for precious metals as a hedge against inflation. Silver, platinum and palladium also dropped.

Crude-oil futures declined for the first day in four sessions after jumping to a record yesterday on concern a possible attack on Iran's nuclear facilities would disrupt petroleum supplies. Gold dropped yesterday after European Central Bank President Jean- Claude Trichet signaled interest rates may be high enough to control inflation.

``We have peaked for the time being and now trying to find some support,'' said Wolfgang Wrzesniok-Rossbach, head of marketing and sales at refiner Heraeus Holding GmbH in Hanau, Germany. ``I don't foresee a big drop right now.''

Gold for immediate delivery fell $2.83, or 0.3 percent, to $931.63 an ounce as of 10 a.m. in London, narrowing this week's gain to 0.5 percent. Prices have climbed 43 percent in the past year as the Federal Reserve slashed borrowing costs, undermining the value of the dollar.

Short-term stochastics indicators signal gold may fall to $918 before a rebound, said Dhiren Sarin, an analyst at Barclays Capital in London. Stochastic charts measure the price of a security relative to its highs and lows during a particular period to try to predict a gain or decline.

The metal rose to a record $1,032.70 an ounce on March 17.

Platinum fell $4 to $2,023.50 an ounce, silver declined 22 cents to $18.04 an ounce and palladium dropped $4 to $459.25 an ounce. The UBS Bloomberg CMCI Index of 26 raw materials has advanced 34 percent this year.

The New York Mercantile Exchange is closed today for the U.S. Independence Day holiday.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net