Gold Declines in London on Slowing Inflation in U.K., U.S.

By Nicholas Larkin

Nov. 18 (Bloomberg) -- Gold fell in London as U.K. inflation slowed the most in more than a decade and before U.S. data that will probably show a record slump in producer prices, curbing the appeal of the precious metal as a hedge against rising costs.

U.K. consumer prices rose 4.5 percent in October from a year earlier, down from 5.2 percent the prior month, the Office for National Statistics said today in London. U.S. producer prices probably fell 1.9 percent, according to a Bloomberg survey.

The reports are showing ``there's absolutely no need to buy gold as a hedge against inflation,'' Peter Fertig, a consultant for Dresdner Kleinwort, said by phone from Hainburg in Germany.

Gold for immediate delivery fell $3.18, or 0.4 percent, to $734.79 an ounce by 12:32 p.m. in London. December futures were $7.90, or 1.1 percent, lower at $734.10 in electronic trading on the Comex division of the New York Mercantile Exchange.

Deflation, or a prolonged decrease in prices, is displacing inflation as a threat for policy makers including the Federal Reserve. The U.S. will price data at 1:30 p.m. London time.

Bullion has declined 29 percent since reaching a record $1,032.70 an ounce in March, as investors liquidated commodity holdings to raise cash. The metal rose to $736.50 in the morning ``fixing'' in London used by some mining companies to sell production, from $734 at the previous afternoon fixing.

Platinum gained $5.75, or 0.7 percent, to $819.75 an ounce. The metal has slipped 64 percent since reaching a record $2,301.50 an ounce in March.

Lonmin Plc, the third-largest platinum producer, will suspend opencast mining at Marikana in South Africa by Dec. 31 and may close another mine after prices plunged.

``We anticipate a sharp decline in investment in the industry in the short term, which could include shaft closures and mothballing,'' Lonmin said today in a statement, adding falling supply may lead to a rebound in prices.

Among other metals in London, silver rose 0.4 percent to $9.33 an ounce and palladium was unchanged at $218.50 an ounce.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net