Gold, Silver Fall as Oil Drop Erodes Demand for Inflation Hedge

By Pham-Duy Nguyen

Sept. 9 (Bloomberg) -- Gold fell for a seventh straight session, touching a three-week low, as a decline in energy costs reduced demand for the precious metal as a hedge against inflation. Silver also dropped.

Crude-oil tumbled as much as 2.3 percent to $103.85 a barrel today in New York, the lowest price since April. Some investors buy gold to preserve purchasing power when energy costs rise. Gold reached a record in March as oil headed for an all-time high in July.

``Oil is starting to pull gold down,'' said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. ``The market is looking for excuses and the current excuse is oil.''

Gold futures for December delivery fell $13.50, or 1.7 percent, to $789 an ounce at 8:56 a.m. on the Comex division of the New York Mercantile Exchange, the lowest for a most-active contract since Aug. 19. A close at that price would be the first under $800 since Aug. 15.

Silver futures for December delivery fell 20 cents, or 1.7 percent, to $11.865 an ounce on Comex. Before today, silver fell 19 percent this year, while gold slipped 4.2 percent.


To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.