Gold Declines in Asia, Heads for First Weekly Drop in Three

By Glenys Sim

Feb. 6 (Bloomberg) -- Gold dropped in Asia, heading for the first weekly decline in three weeks, as the metal’s advance to a six-month high led investors to sell the metal and lock in gains. Platinum also fell.

Bullion slumped 1.8 percent this week after ending at $927.85 an ounce on Jan. 30, the highest closing price since July 28. The metal also fell as the dollar advanced for a sixth week against the euro, reducing demand for alternative investments.

“By mid-year, our expectation of an extended global recession could result in significant economic pressures in the emerging market economies and we would expect gold to retreat and test $750,” RBC Capital Markets analysts led by Stephen Walker said in a report.

Bullion for immediate delivery dropped as much as 0.8 percent to $907.40 an ounce, and traded at $911.19 at 10:18 a.m. in Singapore. It reached a 16-week intraday high of $929.70 on Jan. 30.

Gold for April delivery was down 0.2 percent at $912.40 in after-hours electronic trading on the Comex division of the New York Mercantile Exchange. Gold on the Tokyo Commodity Exchange rose 2.2 percent to 2,673 yen a gram ($912 an ounce) at the same time.

RBC maintained its price forecasts of $850 an ounce in 2009 and $875 an ounce in 2010 on expectations for “significant volatility” in the gold market.

“Expected destocking or sales of scrap gold could be similar to what happened in 1998 during the Asian crisis when gold sales more than offset investment demand for gold,” Walker said in the report e-mailed yesterday.

Platinum Declines

Platinum lost 0.3 percent at $974.50 an ounce at 10:14 a.m. Singapore time, down 1.4 percent for the week, on concern that demand will drop as the auto industry slumps.

U.S. auto-parts suppliers, struggling with losses as sales dwindle, may seek as much as $25.5 billion in government aid to prevent an industry collapse.

The appeal for help is aimed at widening the Treasury’s commitment to the auto industry as the U.S. market sinks to its lowest since the early 1980s. General Motors Corp. and Chrysler LLC are working to avert bankruptcy with $17.4 billion in loans and face a Feb. 17 deadline to prove they’re viable.

Among other precious metals for immediate delivery, silver fell 0.4 percent to $12.81 an ounce, and palladium was little changed at $201.50 an ounce as of 9:56 a.m. in Singapore.

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