Gold fell for the first trading session in six in London as energy prices declined, eroding the appeal of the metal as a hedge against inflation.
Bullion has dropped by a fifth since trading at a 26-year high of $730.40 an ounce on May 12, partly as crude oil plunged from a record. Oil tumbled on expectations a U.S. Energy Department report tomorrow will show motor-fuel supplies rose for a sixth week, gaining 800,000 barrels, according to a Bloomberg News survey.
``Things are risky on the downside,'' said David Holmes, director of precious metals at Dresdner Kleinwort Group in London. ``If oil declines below $60 a barrel, gold will follow.''
Gold for immediate delivery fell $1.50, or 0.3 percent, to $589.30 an ounce at 11:35 a.m. in London. Gold for December delivery on the Comex division of the New York Mercantile Exchange dropped $1.40, or 0.2 percent, to $594.50.
Crude declined 0.7 percent to $61 a barrel on Nymex. It fell below $60 yesterday to a six-month low of $59.52.
Some investors buy gold when energy costs climb. Gold futures reached a record $873 an ounce in January 1980 when oil costs doubled in a year, sparking a surge in inflation.
The correlation between oil and gold is 0.55 this year while that between gold and the trade-weighted basket value of the dollar against six major currencies is 0.47.
Palladium rose $2 to $317 an ounce. Platinum dropped $4 to $1,127.50 and silver fell 7.5 cents to $11.17.
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Gold Falls as Crude Oil Declines, Easing Concern Over Inflation
Gold fell for the first trading session in six in London