Gold prices slip 5% in past week

Demand for metal as inflation hedge slides

by Tom Stundza -- Purchasing, 7/23/2008 10:59:00 AM

Gold for immediate delivery slipped to a one-week low of $940/troy ounce in London this morning as declining oil prices have eroded demand for the precious metal as a hedge against inflation. Gold for August delivery on the Comex division of the New York Mercantile Exchange also dropped to $940. Bloomberg news service says gold has dropped by 5% in daily trading from a three-month high of $988 recorded last week as investment demand for commodities has been curbed.

“The summer surge in oil prices jump-started an increase in world inflation and the cost of other commodities,'' James Lago, head of research at Manila-based PCCI Securities Brokers, writes to clients. But, he adds, recent slippage in world oil prices is causing prices of traded commodities to dip as well.

Oil closed Tuesday on the New York Mercantile Exchange at $128/barrel, its lowest reading since June 5. Oil has lost nearly $11 in the last week alone, and is off about $20 from its record high, set earlier this month. Then, this morning, oil prices extended their decline in trading after the government reported a much larger-than-expected increase in gasoline supplies.