Gold Falls as Physical Demand Slows; Silver Little Changed

Sept. 3 (Bloomberg) -- Gold fell in Asia as physical demand slowed following the precious metal's rise to a three-week high. Silver was little changed.
Gold rose the most in a week on Aug. 31 on speculation that a rally in equities would boost investment demand. The Morgan Stanley Capital International Asia-Pacific Index gave up early gains after Japan's government reported an unexpected drop in corporate investment and the steepest slide in wages in three years. It was little changed at 152.10 at 1:20 p.m. in Singapore.
``In Asia the market is primarily driven by physical buying and physical demand has slowed down at this price level,'' said Ellison Chu, manager of precious metals at Standard Bank Asia Ltd. in Hong Kong. ``Overall trading has been very quiet and is likely to stay this way for the rest of the day as the U.S. is closed for a holiday today.''
Gold for immediate delivery, which reached $674.66 an ounce in the previous session, was down 0.2 percent at $671.93 an ounce at 1:18 p.m. in Singapore. Silver for immediate delivery traded little changed at $12.10 an ounce.
In Japan, gold for delivery in August rose 12 yen, or 0.5 percent, to 2,531 yen a gram ($679 an ounce) on the Tokyo Commodity Exchange at 2:21 p.m. local time.
Gold for December delivery fell 0.1 percent to $681.10 an ounce on the Comex division of the New York Mercantile Exchange at 1:15 p.m. Singapore time.
Indian Demand
Economic growth in India, the world's largest consumer of gold, will help limit gold's downside, according to James Steel, a metals analyst at HSBC Securities (USA) Inc. in New York.
South Asia's largest economy expanded 9.3 percent in the three months to June 30 from a year earlier, after gaining 9.1 percent in the previous quarter, the statistics bureau said in New Delhi on Aug. 31. That beat the median 9 percent forecast in a Bloomberg News survey of 18 economists.
``Some of the increase in personal disposable income that accompanies economic growth can be expected to end up supporting jewelry and other bullion demand,'' Steel wrote in a Aug. 31 report. The strength of the Indian rupee, partly resulting from economic growth, also helps to defray the rising cost of gold in local currency terms, he said.
A strike a Lihir Gold Ltd. mine, which halted production temporarily, is also seen as supportive for gold. The Papua New Guinea gold-mining company said today that it's `hopeful'' the strike may end in the next two days as the government steps in to try and resolve the dispute.