Gold fell in New York for the first time in three days as a rally to a six-week high spurred some investors to sell the metal amid lower demand from Asia. Silver dropped in London, paring its best start to a year since 1980.

Bullion reached $1,681.80 an ounce yesterday, the most since Dec. 12, amid concern about Europe’s debt crisis and as the European Union agreed a ban on imports of oil from Iran as part of measures to increase the pressure on its nuclear program. Financial markets in Asian countries including China and South Korea were shut today for the Lunar New Year holiday.

Gold “may be vulnerable to profit-taking, with physical buying reduced due to Chinese holidays,” James Moore, an analyst at TheBullionDesk.com in London, wrote in a report.

Gold for February delivery dropped $13, or 0.8 percent, to $1,665.30 an ounce by 8:01 a.m. on the Comex in New York. Bullion for immediate delivery fell 0.7 percent to $1,665.60 in London.

The metal climbed 10 percent in 2011, an 11th consecutive annual gain, as investors sought to diversify from equities and some currencies. While gold slid 13 percent since touching a record $1,923.70 in September, holdings in bullion-backed exchange-traded products are within 1.6 percent of last month’s all-time high. Assets were 2,355.3 metric tons on Jan. 20, data compiled by Bloomberg show.

European Ministers
European finance ministers pushed bondholders to provide greater debt relief for Greece, denting newfound confidence in Europe’s strategy for coping with the two-year-old debt crisis. Brinkmanship over Greece clouded progress toward new fiscal rules and a beefed-up rescue fund, posing a potential setback to the start-of-year rally in stocks, bonds and the euro.

“We’re not getting much support from physical demand this week with the Chinese out,” said Alexandra Knight, an economist at National Australia Bank Ltd. “Any weakness in the dollar will be helpful to gold but it should be driven by the broader market sentiment for the rest of the week.”

Silver for immediate delivery fell 1.3 percent to $31.9225 an ounce after reaching $32.785 yesterday, the most since Dec. 8. It’s the best-performing precious metal this year with a gain of 15 percent. Silver futures were down 1.1 percent at $31.92 in New York.

Palladium for March delivery was down 2.1 percent at $674.20 an ounce after rising to $690. Platinum for April delivery declined 1 percent to $1,545 an ounce. It earlier today climbed to $1,572, the highest price since Dec. 2.

Source: Bloomberg