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Gold falls after rally fails to break $650, deterring investors

Gold fell in London after a two-day rally failed to push the precious metal over $650 an ounce, triggering selling by speculators who follow charts and graphs.

Price rallies stalled at $650 in November and again earlier this month, helping to send prices to as low as $602.46 on January 5. The metal climbed 23% last year as a drop in the dollar against the euro spurred demand for an alternative investment. „The problem is we need fresh new buying to enable gold to break $650 and we haven't seen that,” said Frederic Panizzutti, senior vice president at MKS Finance, a Geneva-based precious metals and foreign exchange trader. „We strongly believe gold will break $650.”

Gold for immediate delivery dropped 55 cents to $648.25 an ounce at 10:12 a.m. in London, after earlier trading as high as $649. Prices have gained 1.8% this year, while the dollar has advanced 1.6% against the euro. Bullion and the dollar often move in opposite directions. Mining companies are probably buying back production, adding to demand, said Christoph Eibl, who helps manage $1 billion at Tiberius Asset Management in Zug, Switzerland. „I'm hearing there are some buy programs” from the mining companies, he said. „That's why gold is quite well supported.” Gold Fields Ltd., the world's fourth-largest gold producer, will spend $528 million to terminate sales of future production inherited from the purchase of the South Deep mine, the world's largest gold deposit, Finance Director Nick Holland said today in a presentation from Johannesburg.

Gold Fields inherited the sales contracts at Deep Mine that were entered into by the late Western Areas Ltd. CEO Brett Kebble, forcing it to sell gold at less than half the current market price until 2014. Silver gained 14 cents to $13.375 an ounce, palladium advanced 50 cents to $349 and platinum rose $4 to $1,172. (Bloomberg)