Gold Heads for Biggest Weekly Gain in Six Years on Higher Crude

By Rachel Graham

Aug. 22 (Bloomberg) -- Gold headed for its biggest weekly gain in more than six years as rising crude-oil prices and political tension between Russia and the West buoy demand for the metal as a hedge against inflation and as a haven.

Russia's Foreign Ministry said yesterday it was reviewing its relations with the North Atlantic Treaty Organization after western condemnation of its actions in Georgia. Crude added more than $6 a barrel yesterday, heading for its biggest weekly gain in more than two months.

``You must look at the oil,'' Tariq Mahmood, a Dubai-based technical analyst at online trader Global Tradewaves Ltd., said by phone. ``When the news came out about Russia and NATO, that's when we saw the rally with crude and gold.''

Gold for immediate delivery traded down $4, or 0.5 percent, to $832.99 an ounce as of 9:20 a.m. in London. A close at that level would make for a weekly advance of 5.7 percent, the biggest increase since the five days ended Feb. 8, 2002.

Gold futures for December fell 60 cents, or 0.1 percent, to $838.40 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

``If we close over $850 we might see $920 in the next couple of weeks,'' Mahmood said. ``If it fails to close about this level, we could easily see $790 again.''

Among other metals for immediate delivery, silver dropped 10.5 cents, or 0.8 percent, to $13.74 an ounce. Platinum added $6.50, or 0.5 percent, to $1,466 an ounce and palladium gained $2.25, or 0.8 percent, to $292.25 an ounce.

To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net