Gold Falls for Second Day as Commodities Drop on Recession

Dec. 4 (Bloomberg) -- Gold prices fell for the second straight day as commodities and equities tumbled on concern the global recession will deepen. Silver also dropped.

The Reuters/Jefferies CRB Index of 19 raw materials touched the lowest level since September 2002, led by tumbling energy prices. Some Federal Reserve officials have expressed concern about the risks of deflation. Gold often climbs on demand for a hedge against rising consumer prices. The Dow Jones Industrial Average dropped as much as 3.4 percent.

“Deflationary fears are helping some modest pressure on gold,” said Stephen Platt, a commodities analyst at Archer Financial Services Inc. in Chicago.

Gold futures for February delivery dropped $5, or 0.6 percent, to $765.50 an ounce on the Comex division of the New York Mercantile Exchange. The metal dropped 1.6 percent yesterday.

Silver futures for March delivery fell 7 cents, or 0.7 percent, to $9.52 an ounce.

Gold is down 8.7 percent this year, while silver has tumbled 36 percent. The CRB index has slid 39 percent.

Earlier today, gold gained as much as 2.5 percent as the dollar declined. The metal generally moves in the opposite direction of the greenback.

Gold may rebound later this month, Platt said. “It certainly looks like the dollar is collapsing. You have to be impressed by how this gold market holds up.”

‘Struggle to Recover’

Still, “commodities will struggle to recover any ground as the economic downturn has further to go, and we expect more bad news over the next few months,” Standard Chartered Plc analysts Helen Henton and Dan Smith said in a report.

“Gold will trade in a broad sideways trend in the months ahead,” partly on recession concerns, the analysts said.

In the second half of 2009, “gold should regain some substantial investment demand” and may rally to above $900, the analysts said.

Gold assets held in exchange-traded funds managed by ETF Securities Ltd. rose to 1.708 million ounces, from 1.615 million on Dec. 2, the Jersey, Channel Islands-based company said today.