Gold Declines in Asia Ahead of G-7 Finance Ministers Meeting

By Feiwen Rong

Oct. 9 (Bloomberg) -- Gold declined in Asia on speculation a Group of Seven finance ministers meeting tomorrow may try to support the dollar to stabilize the global financial system, eroding the metal's appeal as an alternative asset.

The dollar rose against the Japanese yen for the first time this month after central banks in the U.S., U.K., Europe, Canada, China, and a number of Asian countries cut borrowing costs to counter the worst financial crisis since the Great Depression. Asian equities also advanced today, snapping a five-day plunge.

``The G-7 meeting might reach some solution or policy designed to get confidence back into the financial market and to support the U.S. dollar,'' Anderson Cheung, deputy managing director of precious metals at Mitsui Bussan Precious Metals (HK) Ltd., said by phone from Hong Kong. ``Gold might see some pressure ahead of the meeting.''

Bullion for immediate delivery fell $14.70, or 1.6 percent, to $892.92 an ounce at 1:29 p.m. in Singapore, after touching $921.31 yesterday, the highest since Sept. 29. Silver for immediate delivery was down 1.1 percent at $11.61 an ounce.


The Federal Reserve, European Central Bank, Bank of England, Bank of Canada and Sweden's Riksbank each reduced their benchmark rates by half a percentage point yesterday. The Bank of Japan, which didn't participate in the move, said it supported the action. Switzerland also took part. China's central bank separately cut its key rate 0.27 percentage point.

More Interest Cuts

The decision came as U.S. stock indexes head for their biggest annual decline since 1937. Japan's benchmark yesterday had the worst drop in two decades.

Still, gold, up 8.6 percent in the past three days, may climb after the G-7 meeting because ``the central banks and governments may not be able to revive confidence in the financial system and people still seek gold as a safe haven,'' said Cheung.

The full impact to the real economy ``from this extraordinary financial shock is yet to occur,'' analysts led by Warren Hogan at ANZ Banking Group Ltd., said in a report today. ``We expect further interest rate cuts by the Fed, the European Central Bank, the Bank of England, the Reserve Bank of Australia and the Reserve Bank of New Zealand.''

``Gold will be the outperformer as it maintains its safe haven status'' while other commodities including oil, base metals and bulk commodity will remain under pressure, Hogan added.

December-delivery gold fell 1.2 percent to $896.10 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

Gold for August delivery fell 1.5 percent to 2,861 yen a gram ($886 an ounce) on the Tokyo Commodity Exchange at 2:36 p.m. local time.

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