Gold falls in London on high prices, silver drops

Gold fell in London for the first time in more than a week after a rally to a 27-year high curbed demand from jewellers, the biggest buyers. Silver also dropped.

Demand has weakened in "price-sensitive'' countries including China and India, the biggest market for gold, said Philip Klapwijk, executive chairman of London-based research company GFMS Ltd. Gold rose yesterday to $767.09 an ounce, the highest since January 1980, on signs of investment demand.

"There's definitely been some weakness in demand at these prices,'' Klapwijk said in a phone interview from Chengdu in China. "At $760 gold, it will hit demand outside even the Asian markets.''

Gold for immediate delivery fell $2.96, or 0.4 per cent, to $757.54 an ounce as of 9:32 am in London, the first drop since October 8.

Silver declined 4 cents to $13.585 an ounce.

India's stocks tumbled, shutting down the Bombay Stock Exchange for an hour, after regulators proposed restrictions on investments favoured by global hedge funds. The Sensex index dropped 1.7 per cent, after earlier falling as much as 9.2 per cent.

"If this does persist, you have a bigger problem in terms of Indian demand for gold," said Michael Jansen, an analyst at JPMorgan Securities in London.