Gold sobers down on low oil prices

Gold fell in London from a seven-week high as lower oil prices reduced the appeal of the precious metal as a hedge against inflation.

Gold for almost two weeks has moved in tandem with crude oil, which dropped 1.1 percent today after yesterday surging the most since September 2005. Gold is little changed this year after climbing 23 percent in 2006.

"Gold's performance this year is symptomatic of the whole commodity picture at the moment,'' said David Coates, mining analyst at Ambrian Partners Ltd. in London. Oil is a "short term'' influence on gold, he added.

Gold for immediate delivery dropped $4.10, or 0.6 per cent, to $642.60 an ounce at 9:18 am in London. Prices climbed 2 per cent yesterday to the highest since December 5.

Crude oil for March delivery fell as much as 59 cents, or 1.1 per cent, to $54.45 a barrel in after-hours electronic trading on the New York Mercantile Exchange, as a government report today may show commercial stockpiles rose for a second week. It traded at $54.50 at 9:20 p.m. in London.

Silver fell 6 cents to $13.185 an ounce, palladium was unchanged at $347.50 an ounce and platinum dropped $13.50 to $1,161 an ounce.