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Gold drops as confidence weakens, oil

NEW YORK/LONDON (Reuters) 14/08/09.  Gold futures fell below $950 an
ounce and ended lower on Friday, as oil tumbled and the dollar rose amid
lackluster U.S. consumer confidence data, dampening gold's appeal as a
hedge against inflation.

Investors took profits ahead of the weekend after commodities and
equities markets surged on encouraging economic data earlier this week.

But data turned sour on Friday when consumer confidence for August fell
more than expected, according to the preliminary reading of the
Reuters/University of Michigan Surveys of Consumers.

"Certainly, the expectations of inflation are very muted at this point. It may
take a lot longer than gold bulls think before inflation really takes off," said
Tom Hartmann, metals broker at California-based Altavest.

"We certainly could get a correction in gold that is going to be steeper than
some people think," he said.

U.S. December gold futures settled down $7.80 at $948.70 an ounce on the
COMEX division of the New York Mercantile Exchange.

Spot gold was at $945.25 at 2:19 p.m. EDT (1819 GMT), compared with
$953.50 late in New York on Thursday.

Standard Bank analyst Walter de Wet said the data showed little
inflationary pressure.

"The longer-term expectations are still in the market that inflation could
rise, but clearly not in the next couple of months," he said.

A separate report showed U.S. consumer prices were flat in July and
dropped over the past 12 months at the fastest rate since 1950. That may
suggest deflation, not inflation, is more likely despite signs the recession
is loosening its grip.

Earlier this year, deflation worries had weighed heavily on bullion
investors, sending the price of gold falling toward $850 an ounce in April.

Wall Street stocks tumbled more than 1 percent, and oil prices dropped
more than $3 to below $68 a barrel. The dollar rose as risk-averse
investors sought a safe haven.


Among other precious metals, silver slipped to $14.65 an ounce against
$15.00. Earlier, silver hit a two-month high of $15.16 due to the initial rise in
gold and a copper rally in Asian trade.

A fall in the gold-silver price ratio to 63 from 72 a month ago suggests
silver is now good value compared to gold.

Among other precious metals, platinum slid to $1,257 an ounce from
$1,265, while palladium dipped to $273 from its previous finish of $274.

The director of A-1 Specialized Services, the world's biggest autocatalyst
recycler, said that U.S. stimulus schemes may prove neutral for the
platinum and palladium market balance as recyclers salvage more metal
per unit from scrapped cars than is used in newer models.