Gold Little Changed as Haven Appeal Dims on Lending Rate Drop

By Dave McCombs

Oct. 22 (Bloomberg) -- Gold traded little changed at near a one-month low in Asia as signs the global credit crisis may be easing cut demand for precious metals as a store of value.

The metal has dropped 7.8 percent in the past five days as Asian money market rates fell and governments worldwide made trillions of dollars available to banks, encouraging lending. South Korea this week joined Europe, Australia and Hong Kong in providing banks with state backing amid a global lending drought.

``The shine is off gold as a safe haven,'' Jonathan Barratt, managing director of Commodity Broking Services in Sydney, said today by phone. ``Financial players across the board have been given some good indications that guarantees on deposits mean you don't have to worry.''

Gold for immediate delivery fell as much as 0.4 percent to $768.38 an ounce and traded little changed at $772.25 an ounce at 11:39 a.m., Tokyo time. It fell yesterday to $766.10 an ounce, the lowest since Sept. 15. Silver for immediate delivery was at $10.13 an ounce, 0.2 percent down from New York yesterday.

The metal will probably trade in a ``narrow range'' this week and may decline to as low as $745 an ounce, Barratt said.

Results of the Federal Reserve's $150 billion auction of one-month loans yesterday suggest the central bank's increase in funds available and the government's capital injections to banks are discouraging cash hoarding.

Banks and securities firms bid for less than the entire amount offered through the Term Auction Facility, or TAF, for the second consecutive auction. Financial institutions had bid for more than the amount since the Fed began the auctions in December.

Gold for December delivery rose 0.6 percent to $772.30 an ounce in after-hours electronic trading at 11:41 a.m. Tokyo time on the Comex division of the New York Mercantile Exchange.

Gold for August delivery on the Tokyo Commodity Exchange fell 2.5 percent to 2,473 yen a gram ($766 an ounce).

To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net.