Gold may fall as oil prices decline

Gold may fall as a drop in the energy costs will reduce the metal's appeal as a hedge against inflation. Gold often moves in an opposite direction vis-a-vis oil.

Oil dropped by 4.9 percent last week and is currently trading at a six-week low. Gold rose 0.3 percent last week. The prices of gold and oil have more than doubled during the last five years.

"Oil is still under pressure today, so gold might have a downside correction,'' said Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago.

Gold futures for April delivery fell 20 cents to $653.70 an ounce at 8:47 a.m. on the Comex division of the New York Mercantile Exchange. The prices are up by 18 percent during the last year.

A futures contract is an obligation to buy or sell a commodity at a pre-determined price for delivery by a specific date.

Some investors buy gold when the energy costs climb to hedge against inflation. Gold futures touched a record $873 an ounce in January 1980 after oil costs doubled in a year, sparking a surge in the inflation rate.