Gold Heads for Weekly Decline in London as Rally Sparks Sales

By Nicholas Larkin

Feb. 6 (Bloomberg) -- Gold, little changed in London, may decline as a two-day rally leads investors to sell the metal and as a stronger dollar reduces demand for bullion as an alternative investment.

Gold, heading for a first weekly decline in three weeks, traded as high as $924.59 an ounce yesterday and reached a three- month high of $929.70 on Jan. 30. The dollar traded little changed against the euro before a report that may show U.S. unemployment in January to the highest level since 1992.

“People may be mainly taking profit after the late move yesterday,” Sagiv Peretz, a senior dealer at trading-system operator Finotec Trading U.K. Ltd., said by phone from London. Worse-than-expected jobs data may still strengthen the dollar and cause gold to fall, he said. “A lot of people are still turning to the dollar. People want to hoard cash.”

Bullion for immediate delivery added 60 cents to $915.15 an ounce at 12:16 p.m. in London. April futures gained $2, or 0.2 percent, to $916.20 in electronic trading on the Comex division of the New York Mercantile Exchange.

The metal slipped to $914 in the morning “fixing” in London, used by some mining companies to sell production, from $920 at yesterday’s afternoon fixing. Spot prices, up 3.7 percent this year, are set for a 1.4 percent drop this week.

Holdings in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, extended gains to a record 867.19 metric tons yesterday. Gold assets in funds managed by ETF Securities Ltd. rose to 2.249 million ounces (70 tons) yesterday, from 2.21 million ounces Feb. 4, the company said.

Inflation Threat

“Gold remains firm as there is increasing nervousness about the global economy,” Mark O’Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin, wrote today in a note. “While the man in the street and the consensus is concerned about deflation, the real medium- to long-term threat is inflation.”

The loss of jobs is shattering consumer confidence and crippling spending. The Labor Department’s report is due at 8:30 a.m. in Washington. A U.S. Treasury official yesterday said details of a financial-recovery plan aimed at reviving the economy will be announced in three days.

Among other metals for immediate delivery in London, silver added 0.3 percent to $12.8962 an ounce. Platinum rose $9.75, or 1 percent, to $986.75 an ounce, and palladium was 2.9 percent higher at $207.50 an ounce.

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