Gold Is Falling Following Oil Prices

Gold declined for a second day, retreating further from a five-month high, as a drop in oil prices curbed the metal's appeal as a hedge against inflation.

Crude futures on the New York Mercantile Exchange fell 2.1 percent yesterday on signs heating-fuel stockpiles in the U.S. are more than adequate. Gold, which touched the highest since Aug. 9 yesterday, often moves in tandem with oil prices.

``Declining oil prices dragged gold prices lower,'' said Kazuhiko Saito, chief analyst at Interes Capital Management in Tokyo. ``Investors are cautious about taking new positions as they want to watch whether gold prices can hold above $640.''

Gold for immediate delivery fell as much as $1.70, or 0.3 percent, to $644.40 an ounce, and traded $645.20 at 11:10 a.m. in Singapore. The precious metal rose to $654.65 yesterday, before closing down $2.70, or 0.4 percent, at $646.10.

Gold prices often reflect investors' expectations for inflation as the commodity can preserve its value better than other assets when the rate of price gains accelerates. Gold futures reached a record $873 an ounce in January 1980 after oil costs doubled in a year, sparking a surge in inflation.

Gold futures for April delivery on the Comex division of the New York Mercantile Exchange fell as much as $4.30, or 0.7 percent, to $650.10 an ounce. The contract traded at $650.90 at 11:12 a.m. in Singapore, down by $3.50, or 0.5 percent.