Gold May Slide as Some Investors Sell to Cover Declines by Other Assets

Gold may decline in London and head for the first weekly retreat since January as some investors sell the metal to raise cash as other assets drop.

European equities slipped for a third day as an 8.9- magnitude earthquake in Japan, the world’s strongest in more than six years, shook buildings across Tokyo and triggered a 10 meter- (33 feet-) high tsunami. Crude oil fell in New York as other commodities including copper slid. Gold retreated 1.3 percent yesterday, the most since Jan. 27.

“Margin clerks like gold for the simple reason that there is always a store of liquidity to be gotten there,” said Dennis Gartman, an economist and the editor of the Suffolk, Virginia- based Gartman Letter. “They like gold because they can sell it easily to raise cash to defend positions elsewhere. They will be doing so today.”

Immediate-delivery bullion fell $2.20, or 0.2 percent, to $1,409.60 an ounce at 11:22 a.m. in London. Prices are down 1.5 percent this week, after reaching a record $1,444.95 on March 7. Gold for April delivery was 0.2 percent lower at $1,409.30 an ounce on the Comex in New York.

Gold declined to $1,409.75 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,413.25 at yesterday’s afternoon fixing.

The earthquake was Japan’s strongest in at least a century, and at least 26 people were killed by the wave and many are missing, according to state broadcaster NHK Television. The Philippines,Indonesia and Papua New Guinea were among more than 20 countries bracing for a possible tsunami. A refinery on fire outside Tokyo exploded. Nuclear power stations were shut.

Inflation Concern

Concern about rising inflation and currency debasement drove gold prices up 30 percent last year for a 10th annual gain. Chinese consumer prices rose at an annual 4.9 percent pace in February. The pace of inflation was unchanged from January and compared with the 4.8 percent median forecast in a Bloomberg News survey of economists. Increasing food and commodity prices have contributed to unrest in North Africa and the Middle East that toppled leaders in Tunisia and Egypt.

Muammar Qaddafi’s son Saif al-Islam Qaddafi said Libyan government forces are mounting a full-scale attack on rebels, the government will never surrender and Western countries will lose if they support the uprising. Saudi Arabian security forces yesterday broke up a rally in the eastern city of al-Qatif before a “Day of Rage” protest planned for today, a local activist said.

European Union leaders meet today to discuss tackling the region’s debt crisis after Moody’s Investors Service this week cut credit ratings for Spain and Greece.

‘Bargain Hunting’

“Given the mix of inflation concerns and the situation in the Middle East and North Africa and European Union debt, we expect dips will continue to be viewed as bargain hunting opportunities,” James Moore, an analyst at TheBullionDesk.com in London, said in a report.

Ten of 16 traders, investors and analysts surveyed by Bloomberg, or 63 percent, said bullion will rise next week. Four predicted lower prices and two were neutral.

Silver for immediate delivery declined 2.4 percent to $34.4725 an ounce. It climbed to $36.7525 on March 7, the highest level since February 1980. That year the metal reached a record $50.35 in New York.

Palladium was down 2.5 percent at $747.75 an ounce after earlier today falling to $744, the lowest level since Jan. 7. Platinum was 0.2 percent higher at $1,766.50 an ounce.

(Source: http://www.bloomberg.com/news/2011-03-11/gold-rebounds-paring-first-weekly-decline-in-six-amid-middle-east-unrest.html)