Gold, Platinum Fall as Decline in Oil Signals Weakening Demand

By Claudia Carpenter

Aug. 5 (Bloomberg) -- Gold, platinum and silver fell as a slump in crude oil to a three-month low added to signs of weakening global economic growth and speculation demand for precious metals used in jewelry and auto parts will wane.

Platinum headed for its biggest three-day drop since at least 1992 as reduced car sales in the U.S. and Germany capped demand for emission-control car parts, the metal's biggest market. Gold has dropped 8 percent since July 11, when oil began its 20 percent slide from a record.

``Fear of real economic slowdown and less demand from emerging markets'' is spurring the declines, said Ben Davies, who helps manage the Hinde Gold Fund in London and prefers investments in gold mining stocks to the metal.

Gold for immediate delivery dropped $9.74, or 1.1 percent, to $885.06 an ounce as of 12:10 p.m. in London after earlier declining to $882.16, the lowest since June 25.

Declines may slow on signs of increased demand from India, the world's largest buyer.

``There is very good physical interest'' in India after a purchasing lull ``for quite some time,'' said Simon Weeks, a London-based managing director at ScotiaMocatta, the metal- trading unit of Canada's Bank of Nova Scotia. Gold at $880 is a ``key point as far as charts are concerned,'' and a drop below may send prices down another $20, Weeks said.

UBS AG analyst John Reade will ``throw the towel in'' on his one- and three-month price forecasts if gold ``closes weakly today,'' he wrote in an e-mail. As of July 21, his forecasts were $1,000 in one month and $1,050 in three months.

Platinum Drops

Platinum declined $23, or 1.5 percent, to $1,542 an ounce, bringing the drop in three days to more than 12 percent. The price earlier fell to $1,537, the lowest since Jan. 22.

Automobile companies use platinum in catalytic converters to reduce noxious gases in vehicle emissions. The devices accounted for 79 percent of demand in Europe last year and 86 percent of use in North America, according to catalyst manufacturer Johnson Matthey Plc.

Silver dropped 22.5 cents to $16.715 an ounce and palladium declined $10.50 to $344 an ounce. Palladium, also used in auto catalysts, earlier fell to $343.50, the lowest since Dec. 10.

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