Gold, Silver Decline in New York on Reduced Investment Demand

Aug. 20 (Bloomberg) -- Gold and silver fell on speculation a slowing U.S. economy will reduce demand for precious metals.
The price of gold dropped 2.2 percent last week as the Dow Jones Industrial Average tumbled 1.2 percent. The Dow index fell as much as 0.7 percent today, erasing early gains. The U.S. Federal Reserve cut its discount rate on Aug. 17 to head off the rout in credit markets. Gold is still up 4.5 percent this year.
``The risk to the economy is on the downside,'' said Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago. ``People are looking for safe returns. Gold doesn't yield returns.''
Gold futures for December delivery fell 30 cents to $666.50 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the price gained as much as 0.6 percent and dropped as much as 0.7 percent.
``Some traders see further losses waiting in the wings,'' Jon Nadler, an investment-products analyst at Montreal-based Kitco Minerals & Metals Co., said in an e-mail. ``Many people are highly skeptical that the Fed move has done anything but give people a chance to have a weekend respite.''
Silver futures for September delivery fell 6.5 cents, or 0.6 percent, to $11.735 an ounce. The metal is down 9.3 percent this year.
Some investors still may put money into gold should equities climb, said Tom Hartmann, a commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``If it appears the economy will recover, that will be supportive for gold.''
An stock rally may also sap demand for precious metals as an alternative investment, said Paul Walker, chief executive officer of London-based metals research firm GFMS Ltd.
``People are taking the view that an environment of lower interest rates is good for stocks,'' Walker said. ``If you take that view, people will put more cash into the stock market, and gold will not be a beneficiary.''