By Nicholas Larkin
Jan. 29 (Bloomberg) -- Gold fell for a third day in London as U.S. measures to ease the financial crisis eroded demand for the metal as a haven from market turmoil.
The Federal Reserve said yesterday it was prepared to buy Treasury securities to improve credit markets, while the U.S. House passed President Barack Obama’s $819 billion stimulus package, which now moves to the Senate. Bullion reached a three- month high of $916.30 on Jan. 26.
“Whoever bought gold as a safe haven a few days ago is now selling back,” Liran Kapeluto, a senior dealer at trading-system operator Finotec Trading U.K. Ltd., said by phone from London. The metal may fall to $850 by next week, he said.
Bullion for immediate delivery slipped as much as $12.75, or 1.4 percent, to $874.80 an ounce and traded at $880.73 by 12:55 p.m. in London. April futures dropped $8.30, or 0.9 percent, to $881.70 in electronic trading on the Comex division of the New York Mercantile Exchange.
The metal fell to $878.50 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $895.25 at yesterday’s afternoon fixing. Spot prices are now down 0.2 percent for the year after gaining as much as 3.6 percent.
“The dollar is a little bit stronger,” helping pull gold prices down, said Alex MacKinnon, a trader at ODL Securities Ltd., by phone from London today.
The dollar rose as much as 1.1 percent against the euro and was last up 0.3 percent. Bullion typically moves in the opposite direction to the U.S. currency.
Toxic Assets
Gold dropped the most in two weeks yesterday after stocks gained globally as Obama’s administration prepared a plan to set up a so-called bad bank to buy toxic financial assets. The Fed left the target range for the main interest rate unchanged at close to zero and warned of a prolonged global economic slowdown that may push the U.S. to the brink of deflation.
Gold may still rise above $1,000 an ounce because of strong demand, said Nick Holland, chief executive officer of Gold Fields Ltd., the world’s fourth-largest producer of the metal, in a Bloomberg television interview. Bullion in exchange-traded funds surged to records the past week as investors concerned about global recession sought a haven.
Some investors buy gold as a hedge against inflation. Crude oil fell as much as 3.2 percent to $40.82 a barrel in New York after U.S. crude inventories gained more than expected last week and refiners reduced output as demand declined.
“Inventory data should keep oil prices under pressure, at least in the near term,” Manqoba Madinane, a commodity analyst at Standard Bank Group Ltd. in Johannesburg, wrote in a report. “This could weigh down precious metals.”
Among other metals for immediate delivery in London, silver declined 1.8 percent to $11.79 an ounce. Platinum lost $6.75, or 0.7 percent, to $949.75 an ounce, and palladium was unchanged at $190.50 an ounce.
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net
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