Gold may drop further as record high investor demand Stokes

Gold may climb in London as a two-day slide from a record increase in demand for physical traders and investors.

Gold fell 2.9 percent the past two days after reaching a record $ 1431.25 an ounce on 07 December. The dollar was little changed against the euro before reports today that economists said will show U.S. initial jobless claims fell and improving consumer confidence. Gold typically moves inversely to the dollar.

"We're seeing a lot of physical demand out of Asia," said Bernard Sin, chief currency and bullion trading metal refinery MKS Finance SA in Geneva. "People are happy to buy here. There is still much concern in the euro area and the U.S."

immediately bullion delivery added $ 7.05, or 0.5 percent, to $ 1,389.13 an ounce at 9:20 am in London. The metal for delivery in February was 0.5 percent, to $ 1,389.70 in the Comex in New York.

Gold has risen 27 percent this year, heading for 10 consecutive annual gain, after the government spent billions of dollars and keep borrowing costs low to boost the economies affected by the worst global recession since World War II. Europe's debt problems and investor demand for an alternative to coins has supported precious metals.

Responsible for Federal Reserve policymakers meet Dec. 14 to discuss a potential plan to increase purchases of Treasury to support the economy. U.S. President Barack Obama this week agreed to extend the tax cuts to boost growth, a measure that can expand the budget deficit of $ 1.3 billion.

Assets Fall

"There is still some demand to buy on dips after a fall in the last couple of days," said Lee Joon, a senior trader at Woori Futures Co. in Seoul. "We can hardly say the gold rally is over. The factors that have pushed up gold prices as an asset for wealth protection and an alternative to a weaker dollar are still there."

gold assets in exchange-traded products fell 3.38 to 2,097.98 tons metric tons yesterday. Holdings reached a record 2,104.65 tonnes on 14 October.

Silver for immediate delivery in London rose 1 percent to $ 28.6775 an ounce, after reaching $ 30.7025 on December 7, the highest since March 1980. The metal is 70 percent this year and reached a record high of $ 50.35 in New York in 1980, a year after the Hunt brothers tried to corner the market.

Palladium gained 1.9 percent to $ 740.25 an ounce. It rose to $ 779.10 on 3 December, the highest since April 2001. Platinum was 0.2 percent, to $ 1,689.55 an ounce.

ETP holdings Platinum jumped 0.94 to 35.76 tonnes tonne yesterday, the highest amount since at least February, according to data compiled from three vendors show. active palladium gained 1.94 tonnes to 67.44 tonnes, also the highest amount since at least February.