Dec. 23 (Bloomberg) -- Gold, little changed today in London, may decline as lower crude-oil prices diminish demand for the metal as a hedge against inflation.

Oil extended its drop from a July record to 73 percent on speculation a deepening global economic slowdown will reduce demand. Volatility in exchange rates may also spur investors to trade less.

Cheaper oil “should keep precious metals under pressure,” Manqoba Madinane, a commodity analyst at Standard Bank Group Ltd. in Johannesburg, wrote in a report. “Continued currency volatility today could further compromise precious metals as most investors may opt to watch the developments from the sidelines.”

Gold for immediate delivery fell $2.45, or 0.3 percent, to $845.60 an ounce by 11:24 a.m. in London. February futures dropped 90 cents, or 0.1 percent, to $846.30 in electronic trading on the Comex division of the New York Mercantile Exchange.

The metal declined to $846 in the morning “fixing” in London used by some mining companies to sell production, from $849 at the afternoon fixing yesterday. Gold touched a record $1,032.70 in March.

Gold has added 3.4 percent in London this month, while the dollar has declined 9.3 percent against the euro. Gold typically moves in the opposite direction to the U.S. currency as a weaker dollar can increase demand for gold as an alternative investment. Oil slipped 27 percent in the period.

‘Thin Conditions’

“The precious complex has become more range-bound over the past 24 hours as traders begin to wind down ahead of the Christmas holiday,” James Moore, an analyst at TheBullionDesk.com in London, wrote in a report. “Given the thin conditions we would look for the range-bound mood to continue.”

The dollar weakened for a second day against the euro before a government report that economists estimate will show sales of new U.S. homes declined to the lowest level in more than 17 years.

Among other metals for immediate delivery in London, silver lost 0.2 percent to $10.82 an ounce. Platinum rose $4, or 0.5 percent, to $855 an ounce, and palladium was 0.9 percent higher at $174 an ounce.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

Last Updated: December 23, 2008 06:56 EST