Precious metals slump on mixed worries

Gold fell in London on speculation that a three-week rally to within 0.7 per cent of $800 an ounce didn't reflect expectations that mining companies are expanding production. Silver also dropped.

China's gold output increased 13 per cent in the first nine months of this year, closing in on South Africa's century-long reign as the world's largest producer.

Gold is trading above the 25-day, 55-day, 100-day and 200-day moving averages, indicating for some traders who use charts to gauge direction that prices may stall.

Gold for immediate delivery dropped $7.40, or 0.9 per cent, to $784.40 an ounce at 9:40 am in London, the first decline since October 22. Prices climbed 7 per cent in the past three weeks to a 27-year high of $794.70 yesterday as the dollar extended declines against the euro and crude oil prices gained.

Platinum fell for a first time in four days in Asian trading as some analysts said the metal's gain to a record was overdone, prompting traders to sell before the Federal Reserve meets to decide interest rates this week.

Platinum climbed yesterday on expectations the dollar will fall further should the Federal Open Market Committee lower interest rates. A weaker currency boosts demand for platinum and other precious metals that trade globally in dollars.

"The market appears to be a bit overbought,'' Shuji Sugata, a research manager at Mitsubishi Corp, Futures & Securities, said. ``There was some position-squaring before tomorrow's FOMC meeting.'' Platinum for immediate delivery fell 1.2 per cent from New York's close yesterday, to $1,443.75 an ounce as of 7:33 am in London.

The metal gained to as much as $1,469.50 yesterday.