Gold Declines as Crude Oil’s Drop Reduces Investors’ Demand

By Jae Hur

Dec. 23 (Bloomberg) -- Gold declined for the third day in four as a drop in oil prices reduced the appeal of the precious metal as a hedge against inflation.

Crude oil extended losses on speculation that the global recession is cutting energy demand faster than producers can reduce output. Gold, used by some investors as a store of value against declining assets and currencies, dropped even as the weakening U.S. economy depressed the dollar against the euro.

“Falling oil prices will keep gold gains at bay and should drag gold prices lower,” said Mark Pervan, senior commodity strategist at Australia and New Zealand Banking Group Ltd. There’s “a set of conflicting factors there. A weak U.S. dollar is helping gold, while a weak oil price is not helping.”

Bullion for immediate delivery declined as much as 0.7 percent to $842 an ounce, and traded at $843.47 at 1:25 p.m. in Singapore. It rose 1.2 percent yesterday. Silver for immediate delivery fell 0.4 percent to $10.80 an ounce.

“Gold appears to be treading water ahead of the Christmas holiday period,” said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.

Gold has gained almost 10 percent this month as the dollar fell and metals, including copper and aluminum weakened. The precious metal reached a record $1,032.70 an ounce in March.

February-delivery gold lost 0.4 percent to $843.90 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

Crude for February fell as much as 2.2 percent to $39.05 barrel in New York after plunging 5.8 percent yesterday. The dollar traded at $1.3979 per euro from $1.3944 late in New York yesterday.

Immediate-delivery platinum rose 0.4 percent to $854 an ounce at 12:56 p.m. Singapore time. Markets in Japan are closed today for a public holiday.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net