Gold may decline after rally to record

Gold may decline in London as some investors sell the metal after its rally to a record Tuesday and amid concern prices might fall if US lawmakers agree to raise the nation's debt ceiling. Gold's 14-day relative strength index, a gauge of whether a commodity is overbought, on Monday rose to 69.5 and prices reached $1,624.07 an ounce as lawmakers remained deadlocked on how to tackle the US debt crisis and avert a default before an August 2 deadline. Some analysts who study charts view a reading above 70 as a signal that prices may be set to drop. "The metal is currently trading close to the overbought region," UBS AG analyst Edel Tully said in an emailed report yesterday. "We expect a correction in the near term." Immediate-delivery bullion fell $2.75, or 0.2 per cent, to $1,611.40 an ounce by 11:47am in London. Gold for December delivery was little changed at $1,614 on the Comex in New York. Article continues below President Barack Obama said the burgeoning US debt levels threatened to do "serious" damage to the economy and blamed the stalemate on a group of Republicans in the House who insist on budget cuts and no tax increases. House Speaker John Boehner said the president had created a "crisis atmosphere" surrounding the debt issue. "The market is clearly very worried about the small, but undeniable, risk of a US default" and the growing threat of a reduced sovereign credit rating, UBS's Tully said. "Considering the scale of speculative positions on Comex, the danger of a large pullback stemming from a positive surprise in the US debt ceiling negotiations challenges investor conviction to hold gold." Hedge-fund managers and other large speculators increased their net-long position in New York gold futures to the highest level since December 20 in the week ended July 19, according to US Commodity Futures Trading Commission data. Net-long positions, or bets prices will rise, rose 11 per cent, from a week earlier.