Gold fell in New York

Gold fell in New York, capping a second straight weekly loss, as China moves to combat inflation and demand growth slow erosion of precious metals and commodities.

China ordered banks to set the largest reserves set aside for the second time in two weeks. The country is the largest gold consumer after India. The Thompson Reuters / Jefferies CRB Index of 19 commodities fell to 1.4 percent. Gold has fallen 5.1 percent from a record $ 1424.30 an ounce on November 09.

"Any effort to squeeze by China will be interpreted by the market as an event of the reduction of inflation, which would have a little shine of gold," said Adam Klopfenstein, senior market strategist at Lind-Waldock in Chicago.

Gold futures for December delivery lost 70 cents to settle at $ 1352.30 at 1:30 pm on the Comex in New York. The metal lost 1 percent this week and 2.3 percent last week.

The reserve requirement will increase by 50 basis points from 29 November, China's central bank said on its website today. The move prompted speculation that the country will also raise borrowing costs.

country's inflation rate rose to a two-year high last month. The growing demand in China, the world's largest consumer of many commodities, the CRB index rose more than 50 percent since 2001.

"Demand for Less'

"Higher reserve requirements and expectations of higher rates to cool the economy means less demand for gold and other commodities," said Frank Lesh, a trader at FuturePath Trading LLC in Chicago.

China bought 153.7 tons of the precious metal in the third quarter, according to the producer-funded World Gold Council India bought 229.5 tons.

Gold is up 23 percent in 2010, heading for 10 consecutive annual profit.

The rally was fueled in part by "the investment appetite higher from Indian and Chinese investors," said Eily Ong, an investment director on the board of London in an interview earlier this week.

However, China's economy is "fast zoom" Klopfenstein said Lind-Waldock. The country "nominal moves to curb the economy will not slow down investment in gold, he said.

Silver futures for December delivery rose 34.5 cents, or 1.3 percent, to $ 27,179 an ounce. The metal has risen 61 percent this year.

Palladium futures for December delivery rose $ 8.20, or 1.2 percent, to $ 703.70 an ounce on the New York Mercantile Exchange. The price has risen 72 percent this year.

Platinum futures for January delivery added $ 7.20, or 0.4 percent, to $ 1671.10 an ounce. The metal has gained 14 percent this year.