Gold Falls for First Time in Three Days in London as Oil Drops

By Nicholas Larkin

Nov. 11 (Bloomberg) -- Gold fell for the first time in three days in London as crude oil declined, reducing the metal's appeal as a hedge against inflation.

Demand for gold as an alternative investment to the dollar also waned as the U.S. currency rebounded against a weighted basket of six major currencies. Oil dropped today on concern the International Energy Agency will lower its 2009 demand forecast as slowing economic growth cuts fuel consumption.

``There's no particular reason to buy oil at the moment and that's taking all commodities down,'' Liran Kapeluto, a senior dealer at trading-system operator Finotec Trading U.K. Ltd., said by phone from London. ``The dollar is strengthening against all major currencies.''

Gold for immediate delivery lost $7.82, or 1.1 percent, to $738.38 an ounce as of 1 p.m. in London. December futures declined $9.30 to $737.20 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange.

Today's drop followed a 1.3 percent increase yesterday after China unveiled a $586 billion spending package to maintain growth in the world's fourth-largest economy. The metal has declined 29 percent since reaching a record $1,032.70 an ounce in March.

Gold fell to $741.75 in the morning ``fixing'' in London used by some mining companies to sell production, from $753 at the previous afternoon fixing.

German investor confidence unexpectedly rose in November as governments and central banks stepped up efforts to fight the turmoil on financial markets, according the ZEW Center for European Economic Research, which aims to predict economic developments six months ahead. Some investors buy gold as a haven in times of financial crisis.

`Remain Robust'

``With recessions only beginning in all major economies and the likelihood that recessions will be protracted and deep, safe haven demand for gold is set to remain robust,'' Mark O'Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin, wrote in a note.

The dollar rose 0.2 percent against a basket of six currencies after earlier slipping 0.3 percent. Gold generally moves in the opposite direction of the U.S. currency. Oil for December delivery in New York slid 3.9 percent to $59.99 a barrel.

Gold assets held in exchange-traded funds managed by ETF Securities Ltd. fell 1.3 percent to 1.514 million ounces on Nov. 7, according to the company's Web site. They were unchanged as of today. Gold in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, was at 749.2 metric tons yesterday.

Among other metals for immediate delivery, silver lost 2.6 percent to $9.92 an ounce. Platinum fell $31.50, or 3.7 percent, to $825.50, and palladium was $2.75, or 1.2 percent, lower at $218.75 an ounce.

ETF Securities' holdings of silver slipped to 14.299 million ounces on Nov. 7 from 14.304 million ounces and palladium assets fell to 231,689 ounces from 231,789 ounces. Platinum assets were unchanged from the Oct. 30 level of 136,264 ounces.

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