Gold Falls, Erasing Earlier Gain; Platinum Extends Monthly Drop

By Claudia Carpenter

Aug. 29 (Bloomberg) -- Gold erased gains in London as platinum headed for its biggest monthly drop since at least 1987.

Gold for immediate delivery fell 92 cents to $833.13 an ounce as of 1:51 p.m. in London, after earlier rising $4.73.

Platinum dropped $7.95 to $1,469.55 an ounce, extending the drop in August to 17 percent. Use of the metal in jewelry, auto catalysts and other industrial applications will decline this year, shrinking the global supply deficit, Johannesburg-based Impala Platinum Holdings Ltd., the world's second-biggest producer of the metal, forecast yesterday.

Supplies will fall short of demand by 90,000 ounces, down from a deficit of 405,000 ounces last year, the company said.

General Motors Corp., Ford Motor Co. and Toyota Motor Corp.'s U.S. sales declined last month, crimping demand for the metal used in auto catalysts to reduce vehicle emissions. The metal soared to a record $2,301.50 in March after mining disruptions in South Africa, the world's largest producer, crimped supplies.

Silver for immediate delivery rose 3.12 cents to $13.7199 an ounce, and palladium increased $5 to $298.75.

Demand for gold as a hedge against inflation may accelerate as Gustav, forecast to become the worst Gulf of Mexico hurricane since Katrina, heads for Louisiana next week, threatening to disrupt a quarter of U.S. petroleum production. Gold has climbed for seven years as the dollar dropped 39 percent against the euro and oil jumped to records.

``Given the storm situation and fears of a spike in oil, people may be taking positions in gold,'' said James Moore, an analyst at TheBullionDesk.com in London.

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