Gold Price Trades Little Changed After Second Weekly Decline

By Feiwen Rong

July 28 (Bloomberg) -- Gold traded little changed in Asia after its second weekly decline as investors tried to gauge the direction of crude oil, which traded near a seven-week low.

Gold has dropped 6 percent since reaching a four-month high July 15 as crude oil has tumbled 16 percent from a record, damping demand for the metal as a hedge against inflation.

``Some people might have switched to short positions in the gold market on expectations that gold might pull back more if oil were to break the $120 support level,'' Peter Tse, chief precious metals trader at Scotia Mocatta, the bullion arm of the Bank of Nova Scotia, said today by phone from Hong Kong.

Bullion for immediate delivery was little changed at $930.76 an ounce at 12:06 p.m. in Singapore. It traded as low as $916.51 an ounce last week, 11 percent below its record $1,032.70 an ounce March 17. Silver was little changed at $17.4250 an ounce.

Oil traded at $123.35 a barrel, near a seven-week settlement price low of $123.26 on July 25, on signs the Organization of Petroleum Exporting Countries and China raised output amid falling demand in U.S. and Asia.

A recovery in equities since July 15, especially some of the ``financials'' including banks and brokerages, also weighed on gold and other precious metals, said John Reade at UBS Ltd. in a report on July 25.

Longs Decline

Hedge-fund managers and other large speculators decreased their net-long positions in New York gold futures in the week ended July 22, according to U.S. Commodity Futures Trading Commission data.

Net-long positions fell by 8,130 contracts, or 4 percent, from a week earlier while the open interest jumped 40.9 percent to 475,606 contracts. Still, speculative long positions, or bets prices will rise, outnumbered short positions by 194,653 contracts on the Comex division of the New York Mercantile Exchange, the Washington-based commission said.

``I think many of the long positions got liquidated during gold's recent move to $920 from above $970 an ounce,'' Tse said. ``It looks like some people are taking short positions, now is looking at gold perhaps testing $910 area.''

December-delivery gold was up 0.3 percent at $940 an ounce in after-hours electronic trading on Comex at 12:19 p.m. in Singapore, while gold for December delivery traded in Shanghai fell to 204.40 yuan a gram ($930 an ounce).

Gold for June 2009 delivery advanced 0.7 percent to 3,252 yen a gram ($938 an ounce) on the Tokyo Commodity Exchange.

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