Gold prices were little changed in Asia as crude oil prices dropped from a four-week high, reducing demand for the precious metal as a hedge against inflation.
Gold often moves in line with oil prices as some investors buy bullion to preserve the value of assets at times of inflation that can be stoked by rising energy costs. Crude oil, which rose yesterday on possible increased demand due to cold weather in the U.S., fell today on speculation that supplies were adequate.
“Oil prices look still under pressure, and so does gold amid some follow-through selling,” said Lim Chye Peng, senior vice president at DBS Bank Ltd. in Singapore.
Gold for immediate delivery traded at $645.60 an ounce at 3:36 p.m. The metal gained $3.60, or 0.6 percent, to $647.30 yesterday.
Crude oil for March delivery was at $56.60 a barrel, down 37 cents, in after-hours electronic trading on the New York Mercantile Exchange at 3:54 p.m. in Singapore. The price rose 5.5 percent to $56.97 yesterday, the highest closing price since Jan. 3 and the biggest one-day gain since Sept 19, 2005.
Investors also refrained from taking positions before a U.S. Federal Reserve meeting and a report on U.S. fourth-quarter gross domestic product, said Kazuhiko Saito, chief analyst at Interes Capital Management in Tokyo.
U.S. policy makers will keep interest rates on hold at a six-year high of 5.25 percent, according to a Bloomberg News survey. Higher rates would boost the appeal of U.S. dollar- denominated assets, making gold less attractive to investors.
“Gold has been confined in a narrow band of $641-$648 as we’ve seen in the past few days,” said Lim at DBS. “It may try to break $641 in next few days following crude.”
Gold for April delivery on the Comex division of the New York Mercantile Exchange traded at $651 at 3:54 p.m. in Singapore.
In Japan, gold for delivery in December 2007 fell 2 yen, or 0.1 percent, to close at 2,536 yen a gram ($650 an ounce) on the Tokyo Commodity Exchange in Tokyo.