Gold Falls as Investors Seek Cash Amid U.S. Financial Turmoil

By Feiwen Rong and Glenys Sim

Sept. 16 (Bloomberg) -- Gold declined for the first day in three as some investors sold the precious metal to raise cash after U.S. stocks tumbled on increased speculation that credit- market losses and the economic slowdown will worsen.

Bullion dropped from its highest in a week after U.S. stocks slumped yesterday by the most since the September 2001 terrorist attacks. The precious metal had jumped 5.4 percent in the past two days.

``In the short-term when disaster happens, some people rush to the door to liquidate whatever they can, be it gold or other assets to raise cash or to cover margin calls,'' Ellison Chu, manager of precious metals at Standard Bank Asia Ltd., said today by phone from Hong Kong.

Gold for immediate delivery fell 1.4 percent to $775.40 an ounce at 12:43 p.m. in Singapore after earlier rising to $788.10 an ounce, the highest in a week. Silver for immediate delivery fell 3.1 percent to $10.77 an ounce.

``Bullion will trade in a volatile range,'' Chu added. ``The whole Lehman bankruptcy news made people worry about the U.S. dollar, which is supportive for gold.''

The dollar traded near a two-month low against the yen on speculation the Federal Reserve will cut the target lending rate today after Lehman filed for bankruptcy.

December-delivery gold fell 1.3 percent to $776.50 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange at 1:02 p.m. in Singapore.

Gold for August delivery traded in Tokyo was down 0.7 percent at 2,600 yen a gram ($774 an ounce) at the same time, while Shanghai gold for December delivery was higher at 172.60 yuan a gram ($786 an ounce).

To contact the reporters on this story: Feiwen Rong in Singapore at frong2@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net