Gold Declines in Asia as Dollar Gains, Stocks Fall; Platinum Up

By Glenys Sim

Jan. 12 (Bloomberg) -- Gold fell in Asia as the dollar strengthened against the euro and equities dropped, reducing demand for the precious metal. Platinum gained.

The euro slipped for a second day against the dollar as traders raised bets that the European Central Bank will cut interest rates to the lowest since 2005 at its Jan. 15 meeting. Asian stocks dropped for a third day on concern an increase in U.S. unemployment signals a worsening global recession.

``Gold will keep its inverse relationship with the dollar in the near term,'' Zhu Lv, research manager at Shanghai Tonglian Futures Co., said today from Shanghai. ``Other factors like the performance of crude oil and equities will also affect the gold price, but to a lesser extent.''

Bullion for immediate delivery fell as much as 0.7 percent to $848.60 an ounce, before trading at $850.70 at 1:59 p.m. in Singapore. Gold for February delivery was 0.5 percent lower at $850.70 in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

Asian stocks fell, led by commodity producers and industrial companies, as the worsening global recession drives down demand for raw materials. The MSCI AC Asia Pacific excluding Japan Index fell 2.6 percent to 241 at 12:58 p.m. in Hong Kong, extending a three-day, 4.9 percent drop.

Still, gold may rebound this week on speculation the dollar will slide, according to 17 of 28 traders, investors and analysts surveyed by Bloomberg. The dollar was at $1.3378 per euro from $1.3476 late Jan. 9 in New York.

Small Gain

Gold climbed 5.8 percent in 2008, the smallest gain since 2004 as the dollar advanced against a weighted basket of six major currencies for the first time in three years. Low interest rates and government bailouts may erode confidence in the greenback, analysts said.

Crude oil dropped for a fifth day in New York, extending last week's 12 percent drop, on concern production cuts by the Organization of Petroleum Exporting Countries will fail to counter a slump in demand. Oil fell as much as 1.8 percent to $40.08 a barrel and last traded at $40.30.

Among other precious metals for immediate delivery, silver was down at 0.4 percent at $11.225 an ounce, platinum was up 0.7 percent at $1,000.50 an ounce, and palladium climbed 0.1 percent to $193 an ounce as of 1:02 p.m. in Singapore.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net