Gold, Silver Fall for Second Day as Oil Declines, Dollar Rises

By Feiwen Rong

Aug. 25 (Bloomberg) -- Gold and silver fell in Asia for the second day as crude oil dropped and a rally in the dollar eroded the appeal of the precious metals as an alternative asset.

Gold, priced in dollars, often moves in the opposite direction to the U.S. currency. Bullion jumped 4.5 percent last week, the biggest weekly gain in six months, while the dollar index fell 0.5 percent. Oil dropped by more than $6 a barrel on Aug. 22, the most in percentage terms for more than three years.

``Gold is following the movement in oil, which fell sharply in New York last Friday,'' K.C. Wong, trader at Standard Bank Asia Ltd., said by telephone from Singapore today.

Bullion for immediate-delivery fell as much as 0.7 percent to $817.58 an ounce and was at $820.10 at 1:32 p.m. in Singapore. Silver for immediate delivery fell 0.3 percent to $13.32 an ounce.

Crude was little changed at $114.62 a barrel at 1:32 p.m. in Singapore during after-hours electronic trading on the New York Mercantile Exchange, as BP Plc resumed flows through a Caspian Sea pipeline. Oil dropped by 5.4 percent on Aug. 22.

The dollar also rose for a second day against the euro on speculation a drop in oil prices will support the U.S. economy.

The dollar gained to $1.4719 per euro at 2:33 p.m. in Tokyo from $1.4793 in New York on Aug. 22. The U.S. currency advanced to 109.99 yen from 110.07 yen.

Central Banks

Gold has been supported in the first half by low levels of sales by central banks, Dan Smith, a metals analyst at Standard Chartered Plc in London, said in a report on Aug. 22.

``Latest figures show that in the 10 months to July sales were just 317 tons, which is equivalent to annualized total 380 tons,'' Smith said. ``This is well below the agreed ceiling of 500 tons per year under the Central Bank Gold Agreement and compares to sales of 476 tons in the previous CBGA year.''

Gold may rise for a second straight week on speculation the dollar's rally against the euro will stall, boosting the precious metal's appeal as an alternative investment, according to a Bloomberg News survey on Aug. 21 and Aug. 22.

Twenty-two of 28 traders, investors and analysts surveyed from Mumbai to Chicago advised buying gold. Five respondents said to sell and one was neutral.

Gold for December delivery was down 1 percent to $825.20 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at 1:29 p.m. in Singapore. Bullion for December delivery on the Shanghai Futures Exchange fell 2.5 percent to 182 yuan a gram ($827 an ounce).

June-delivery gold on the Tokyo Commodity Exchange fell 0.7 percent to at 2,916 yen a gram ($823 an ounce) at 2:29 p.m. local time.

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