Rise in equities hurts gold

Gold declined for the first time in three days in London as the gains by equities curbed demand for the precious metal as a safe haven. Platinum and palladium advanced.

European and Asian stocks climbed and US index futures advanced on speculation that the worst of the global recession may be over. US industry reports showed that the country’s auto sales beat analysts’ forecasts and a manufacturing gauge beat estimates. House prices unexpectedly rose in the UK, where world leaders meet today to discuss their response to the economic crisis at the Group of 20(G-20) summit .

“Equity markets are finding very good support,” Walter de Wet, a London-based analyst at Standard Bank, wrote today in a report. “This optimism might see gold struggle.”

Bullion for immediate delivery fell as much as $7.48, or 0.8 per cent, to $919.92 an ounce and traded at $920.46 by 9:18 a.m. local time. June futures lost 0.5 per cent to $922.70 an ounce in electronic trading on the New York Mercantile Exchange’s Comex division.

The MSCI World Index of shares gained as much as 1.9 per cent, advancing for a third day. Still, the benchmark has dropped 9.5 per cent this year as gold has added 4.4 per cent.

Leaders from the G-20 nations meet in London today to consider an agenda aimed at ending the worldwide slump and avoiding a repeat of the financial crisis. US President Barack Obama and his G-20 counterparts, responsible for 85 per cent of the world economy, are scheduled to release a statement at about 3 p.m. London time.

Inflation Concern
As traditional measures reach their limits, policy makers have indicated they may offer banks longer-term loans to ease credit strains. The Federal Reserve is buying Treasury bonds in an effort to lower consumer interest rates and stoke growth, a policy known as quantitative easing that has fuelled concern among some investors about possible future inflation.

The European Central Bank probably will cut interest rates by 0.5 percentage point to a record low of 1 per cent today, according to a Bloomberg survey of economists. Should ECB President Jean-Claude Trichet “confirm that indeed the ECB will not be easing quantitatively, the euro might gain ground against the dollar,” de Wet wrote.