Gold Extends Decline; Falling Oil, Rising Dollar Reduce Appeal

By Aya Takada

Dec. 19 (Bloomberg) -- Gold declined for a second day as falling oil prices and a recovery by the dollar made the precious metal less attractive to investors. Platinum gained as South African miners curbed output.

Gold fell as much as 0.9 percent to $845.55 an ounce after crude oil tumbled below $36 a barrel for the first time since June 2004, reducing the appeal of bullion as an inflation hedge. The dollar yesterday climbed from a 12-week low against the euro, snapping its 5 percent plunge since the Federal Reserve slashed the main interest rate to as low as zero on Dec. 16.

“Gold is pausing after climbing rapidly on investment demand bolstered by the U.S. monetary policy,” Tatsuo Kageyama, an analyst at Kanetsu Asset Management Co. in Tokyo, said today by phone. “A dip in price will give a good buying opportunity for investors seeking a safe asset amid a global recession.”

Bullion for immediate delivery traded at $850.42 an ounce at 11:40 a.m. in Tokyo. It reached $882.09 on Dec. 17, the highest since Oct. 10, as the Federal Reserve’s near-zero interest rate policy drove the dollar’s tumble against the euro and yen and boosted the appeal of the precious metal as an alternative asset.

Silver for immediate delivery fell 0.3 percent to $10.95 an ounce. Platinum advanced as much as 0.8 percent to $860.50 an ounce and last traded at $855.50.

Platinum, used in auto exhaust systems, is gaining amid speculation producers may accelerate output cuts to stem the recent drop in prices, Kanetsu’s Kageyama said.

Miners in South Africa, accounting for almost 80 percent of world platinum supply, are reducing production as prices slump, David Brown, chief executive officer of Impala Platinum Holdings Ltd., said Dec. 17. Impala, the world’s second-biggest platinum company, is already reducing capital expenditure and “looking closely” at production, Brown said.

Gold for October delivery fell 0.7 percent to 2,434 yen a gram ($848 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break.

Palladium for immediate delivery gained 0.6 percent to $178.50.

To contact the reporters on this story: Aya Takada in Tokyo at atakada2@bloomberg.net; To contact the reporter on this story: