Gold Falls as Crude Oil Slips, Investors Sell After Price Gain

By Nicholas Larkin

Jan. 19 (Bloomberg) -- Gold fell in London as prices at a one-week high spurred some investors to sell, and as a decline in crude oil reduced the metal’s appeal as an inflation hedge.

Bullion climbed 3.1 percent on Jan. 16, the biggest gain in more than a month, as a weaker dollar boosted demand for gold as an alternative investment. Oil declined today on forecasts faltering global economic growth will drive down fuel demand.

Gold is “still moving with oil and the dollar and it depends on what’s going on in these markets,” Wolfgang Wrzesniok-Rossbach, head of marketing and sales at Hanau, Germany-based Heraeus Metallhandels GmbH, said by phone. Trading volume will be low today because of the Martin Luther King Day holiday in the U.S., he said.

Gold for immediate delivery lost as much as $6.41, or 0.8 percent, to $836.74 an ounce and traded at $838.81 an ounce by 12:04 a.m. in London. February futures were 0.2 percent lower at $838.60 in electronic trading on the Comex division of the New York Mercantile Exchange.

The metal rose to $842.50 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $833.75 at the afternoon fixing on Jan. 16.

Crude oil slipped as much as 3.5 percent to $35.22 a barrel in New York. The dollar added 0.2 percent against the euro after earlier falling as much as 0.9 percent.

“Some profit taking has been evident this morning,” James Moore, an analyst at TheBullionDesk.com in London, wrote today in a note. “We remain bullish towards gold from both a fundamental view and belief investors will look to further diversify their portfolios, again turning towards the safe-haven assets.”

Gold Survey

Prices may rise this week on speculation that the dollar will slide, according to 18 of 32 traders, investors and analysts surveyed from Mumbai to Chicago last week. Ten said to sell, and four were neutral.

Standard Bank Ltd. forecast gold may drop to $750 an ounce this quarter as jewelry demand falls and the dollar remains strong against other currencies. The commodity will then rebound and average $910 an ounce for the year as the U.S. currency weakens, the bank said.

Investment in Zuercher Kantonalbank’s gold exchange-traded fund rose to a record 3.264 million ounces last week, from 3.217 million, the bank said today. ETF Securities Ltd. said it has $4.8 billion in gold assets under management, up 55 percent in the past year. Bullion trading more than tripled last year to $14.5 billion, it said.

Among other metals for immediate delivery in London, silver declined 0.7 percent to $11.1925 an ounce. Platinum gained $14.50, or 1.5 percent, to $963.50 an ounce, and palladium was 1.2 percent higher at $187.75 an ounce.

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