Silver Gains and Gold Declines After Rally to Record Prompts Investor Selling;

Gold declined for a second day in London after a rally to a record and a stronger dollar prompted some investors to sell the metal.

The dollar gained against the euro after President Barack Obama agreed to extend tax cuts for two years. Gold, which usually moves inversely to the greenback, reached a record $1,431.25 an ounce yesterday. Precious metals gained this year on Europe’s debt woes and as investors sought an alternative to currencies. Other commodities fell today on speculation China is getting closer to raising interest rates.

“Further profit-taking can be expected in the run-up to year end,” James Moore, an analyst at TheBullionDesk.com in London, said in a report. Still, “the ongoing situation in Europe and the likelihood of further quantitative easing in the U.S. continue to create a positive environment for gold and silver.”

Immediate-delivery bullion lost $5.20, or 0.4 percent, to $1,396.85 an ounce at 11:31 a.m. in London. The metal for February delivery was 0.8 percent lower at $1,397.80 on the Comex in New York.

Bullion fell to $1,395 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,420 at yesterday’s afternoon fixing. The dollar gained as much as 0.6 percent against the euro today.

Bullion may be pressured by a stronger dollar and China’s moves toward monetary tightening,Tom Pawlicki, an analyst at MF Global Holdings Ltd. in Chicago, said in a report.

‘Temporary Profit-Taking’

Gold has jumped 27 percent this year, heading for the 10th straight annual gain, after governments spent trillions of dollars and kept borrowing costs low to boost economies hurt by the most severe global recession since World War II.

“Recent price gains have led to profit-taking by some investors,” Hwang Il Doo, a senior trader at Korea Exchange Bank Futures Co. in Seoul, said by phone today. “I don’t think precious metals turned to a downtrend. This is temporary profit- taking before the end of the year. Gold will continue to be favored through next year as a haven.”

China’s statistics bureau brought forward the release of November economic data on inflation, retail sales, industrial output and fixed-asset investments by two days to Dec. 11, heightening speculation the People’s Bank of China will raise interest rates this weekend. Most main metals on the London Metal Exchange and crude oil futures fell today.

Gold Assets

Gold assets in exchange-traded products rose 2.22 metric tons to 2,101.37 tons yesterday, the highest amount since Oct. 15, according to data compiled by Bloomberg from 10 providers. Holdings reached a record 2,104.65 tons on Oct. 14. Silver holdings jumped 136.17 tons to 15,009.54 tons, data from four providers show. That’s the biggest daily gain in almost a month and the highest amount since at least February.

Silver for immediate delivery in London rose 1.4 percent to $29.0775 an ounce, after yesterday reaching $30.7025, the highest price since March 1980. The metal is up 72 percent this year and reached an all-time high of $50.35 in New York in 1980, a year after the Hunt brothers tried to corner the market.

Palladium added 0.3 percent to $734.80. It climbed to $779.10 on Dec. 3, the highest price since April 2001. Platinum was 0.3 percent lower at $1,686.50 an ounce.