Gold Drops in London as Dollar Gains, Oil Slips; Platinum Drops

By Marianne Stigset

Sept. 9 (Bloomberg) -- Gold fell for a second day in London as the dollar strengthened and crude oil retreated, eroding the appeal of the metal as a hedge against declines in the U.S. currency and inflation. Platinum slid to almost a one-year low.

Gold slipped below $800 an ounce as the dollar rose to the highest in 11 months against the euro. Crude oil fell in New York after Saudi Arabian Oil Minister Ali Al-Naimi said supplies were sufficient to meet demand.

``The dollar is stronger and crude oil is declining,'' Alexander Zumpfe, a precious metals trader at Hanau, Germany- based Heraeus Metallhandels GmbH, said by phone. ``As long as these two sectors are under pressure, I don't see how gold will recover.''

Gold for immediate delivery fell $2.55, or 0.3 percent, to $799.74 an ounce as of 8:50 a.m. in London. Gold futures for December rose 0.2 percent to $804 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange.

``Seasonal demand in the physical market, coupled with stabilizing central bank holdings, should anchor the metal at current levels,'' Manqoba Madinane, a commodity analyst at Standard Bank Group Ltd. in Johannesburg, said in a report today. ``Primary support for gold is at $791.''

Rand Refinery Ltd., the world's largest gold refinery, last month said it ran out of South African Krugerrands after an ``unusually large'' order from a buyer in Switzerland.

Platinum Falls

Hedge-fund managers and other large speculators decreased their net-long positions in New York gold futures in the week ended Sept. 2, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 93,191 contracts on the Comex division of the New York Mercantile Exchange, the commission said in its Commitments of Traders report on Sept. 5.

Platinum, used in auto catalysts, dropped $42.50, or 3.2 percent, to $1,301 an ounce, the lowest since Sept. 18, 2007.

``Weak Euro zone economic growth expectations, coupled with the strengthening U.S. dollar, should keep investors on the sidelines,'' Madinane said.

The European Central Bank kept its main interest rate at 4.25 percent on Sept. 4 as inflation held at almost twice its ceiling, driven by higher energy prices. The bank cut its 2008 economic growth forecast to about 1.4 percent and its 2009 prediction to 1.2 percent.

Among other metals for immediate delivery, silver fell 13.50 cents, or 1.1 percent, to $11.955 an ounce and palladium gained 75 cents, or 0.3 percent, to $272.75 an ounce.

``Further weakness in platinum could trigger a move towards $240'' an ounce for palladium, James Moore, an analyst at TheBullionDesk.com in London, wrote in a report.

To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net