Focusing more on inflation areall conspiring to push gold lower

Tag : base metals
Oil prices fell below $126 a barrel, helping to soothe some of theinflation fears that have supported gold, while other commoditiessuch as grains and base metals also slipped.
Gold dropped to $923.70/924.70 an ounce at 1450 GMT from$948.30/949.90 late in New York on Tuesday, having hit an intradaylow of $921.80 -- its lowest level since July 9.
HSBC (nyse: HBC - news - people ) analyst James Steel said a combination of weaker oil prices,declines in other commodities, an improvement in the credit marketand the belief that the Fed may be focusing more on inflation areall conspiring to push gold lower.
"Gold has four major things hitting it today so I would be verysuprised, given the way other commodities and financial markets aremoving, if gold wasn't down," he said.
The dollar rallied to a two-week high against the euro, supportedby a slide in the oil price and a recovery in risk appetite. Astronger greenback tends to pressure gold, which is often bought asan alternative investment to the currency.
Crude prices were also lower, giving up more than $2 a barrel tradeat $126.05 a barrel at 1451 GMT, as concerns eased that HurricaneDolly would hit oil installations in the Gulf of Mexico, and aftera rise in U.S. gasoline stocks.,
Gold usually moves in the same direction as crude, as it is oftenbought as a hedge against oil-led inflation.
Investor interest in gold seemed to be softening, with the amountof gold held to back the SPDR Gold Trust in New York -- the world'sbiggest gold-backed exchange-traded fund -- falling 2 percent to690.26 tonnes on Tuesday.
Holdings previously had been close to a record.

PGMs DECLINE
The platinum group metals also posted sharp losses, with platinumsliding to a 5-1/2 month low and palladium slumping more than 5percent, in sympathy with gold and amid fears over demand from carmanufacturers.
The precious metal is widely used by the car industry in catalyticconverters.
General Motors (nyse: GM - news - people ) said on Wednesday that its global sales fell 5 percent in thesecond quarter, hurt by a 20 percent decline in North America.
An earlier report said carmaker Toyota (nyse: TM - news - people ) may cut its sales target this year.
The reports suggest "a weakening auto market, and consequently lessdemand from the auto-catalyst market," said Fairfax metals analystJohn Mayer.
Platinum prices in particular have slipped sharply over the last 10days, which the noble metal currently trading nearly 25 percentbelow its March peak of $2,290 an ounce.
However, with output from major producer South Africa -- supplierof 80 percent of the world's platinum -- still constrained by apower shortage, analysts say the market remains firmlyunderpinnned, and should not fall too much further.
Platinum "looks increasingly good value at current levels",according to Mitsubishi (other-otc: MSBHY.PK - news - people ) analyst Tom Kendall.
Spot platinum touched a session low of $1,730.00 an ounce, itsweakest level since February 1, before recovering to trade at$1,733.00/1,753.00 against $1,800.50/1,820.50 an ounce in New York.
Spot palladium dropped to $380.00/388.00 an ounce from$405.50/413.50 late in New York, having earlier touched an intradaylow of $377.50.
Among other precious metals, spot silver tracked gold lower to$17.54/17.59 an ounce, against $18.00/18.08 late in New York onTuesday.
(Reporting by Jan Harvey; Editing by Michael Roddy) Copyright 2008 Reuters, Click for Restriction
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