Gold falls from 8-mth high

Gold fell from the highest close since May in London as the dollar gained against the euro and oil prices declined, spurring some investors to sell the commodity as an alternative investment and hedge.

Gold and the dollar often trade in opposite directions, while bullion tends to track oil. The metal surged 23 per cent last year, its sixth annual gain, partly as the dollar slid 11 per cent against the common European currency. Gold rose to a 26-year high in May as oil prices traded at a record, prompting some investors to buy the metal as a hedge against inflation.

"The dollar is regaining some ground, and oil's come off a bit,'' said James Moore, a Kettering, England-based precious-metals analyst with TheBullionDesk.com.

"It's pretty much going to be a dollar story this week.'' Gold for immediate delivery fell $2.80, or 0.4 per cent, to $664.05 an ounce in London. The metal closed at $666.85 on February 9, the highest in eight months last year.

The dollar traded at $1.2983 against the euro, compared with $1.3008 in New York on February 9. Oil fell on speculation that supplies are sufficient to meet increased heating demand caused by a cold snap in the US.

Crude oil for March delivery fell as much as $1.04, or 1.7 per cent, to $58.85 a barrel in after-hours electronic trading on the New York Mercantile Exchange.

It was at $58.96 in London.

South Africa, the world's biggest producer of precious metals and ferroalloys, said metals and minerals output fell 1.1 per cent in December from a year earlier. Gold production declined 7.7 per cent. The information was released on the Web site of the Pretoria-based national statistics agency.

Among other precious metals for immediate delivery in London, silver fell 6 cents to $13.81, palladium dropped 50 cents to $338, and platinum rose $2.75 to $1,195.50 an ounce.