Jan. 18 (Bloomberg) -- Gold in New York fell the most in a month as some investors sold bullion to cover losses in the stock market and a government report showed inflation remains tame.

Gold is up 4.9 percent this month and reached $565.50 an ounce on Jan. 13, the highest since 1981. Prices fell after the investigation of a Japanese technology company sparked a 2.9 percent slide in the Nikkei 225 Stock Average. The U.S. said consumer prices fell for a second straight month in December.

``People are selling out of gold to offset any stock-market losses,'' said Carlos Perez Santalla, president of Hudson River Futures in New York.

Gold futures for February delivery fell $9.80, or 1.8 percent, to $544.50 an ounce on the Comex division of the New York Mercantile Exchange, the biggest percentage drop since Dec. 14. Gold jumped 18 percent last year, outperforming the 1.2 percent gain in the Nasdaq and a 3 percent rise in the Standard & Poor's 500.

A decline in the Nikkei 225, whose 40 percent gain last year was the biggest since 1986, sparked the decline in gold, said Alan Williamson, an analyst at HSBC Securities Inc. in London, said today in a report.

``Over recent months gold and equity prices have been positively correlated,'' Williamson said. ``This has particularly been the case in Japan, where investors have sought to lock in stock market gains by recycling funds into gold. With equity markets weakening, local investors sought to secure gains on gold and move into cash.''

Gold sold in Japanese yen gained 36 percent in 2005.

Trading Halt

The Tokyo Stock Exchange halted trading for just the second time in its 56-year history after a surge in orders overloaded computer systems. The Nikkei's decline was the biggest since April 18.

An investigation into Livedoor Co., an Internet company raided by prosecutors two days ago, was a catalyst for the increase in trade orders, Taizo Nishimuro, the exchange's president, said at a press briefing in Tokyo.

Gold has gained as much as 13 percent since first topping $500 for the first time in 18 years on Nov. 22.

``You've had a $60 run-up in gold,'' said Michael Guido, director of hedge fund marketing and commodity strategy in New York for Paris-based Societe Generale SA. ``There's a lot of selling of long gold positions to finance some of the losses in the equity markets.''

A fall below $550 also triggered more selling by traders who monitor historical prices, Guido said.

Inflation Tame

A drop in the consumer-price index also sent gold lower, easing concern inflation would accelerate, some analysts said.

The 0.1 percent drop in the consumer-price index follows a 0.6 percent fall in November, the first back-to- back decline in two years, the Labor Department said today. Excluding food and fuel, prices rose no faster in 2005 than the year before, supporting the Federal Reserve's view that inflation remains tame. Gold's rally in the past year was fueled partly by concerns about record energy costs.

``Inflation has been one of the main arguments to get into the gold market,'' David Gornall, head of foreign exchange and bullion at Natexis Commodity Markets Ltd. in London, said in an interview today. ``There may not be a great deal of upside to gold this year if you take away the inflation side.''

In 2005, the core index, which excludes energy and food, rose 2.2 percent, the Washington-based Labor department said. That matched the rise in 2004 and suggested companies had difficulty passing on fuel costs that are still higher than a year earlier.

Interest Rates

The limited spillover from higher raw-material costs is one reason Fed policy makers have signaled they may be close to ending a series of interest-rate increases.

``We should be in for a short, sharp correction'' in gold, Jonathan Barratt, head of foreign exchange and precious metals at Tricom Futures Pty, said in an interview from Sydney today.

Avocet Mining Plc, which mines gold in Malaysia and Tajikistan, said today it cut its forward gold sales, retaining its ``leverage to higher gold prices.''

Still, other small mining companies may increase their forward sales, locking in prices that allow them to complete new projects, Gornall of Natexis said.

In London, gold for immediate delivery fell $10.85, or 2 percent, to $543.95 at 6:51 p.m. local time.

Among other precious metals for immediate delivery in London, silver declined 20 cents, or 2.2 percent, to $8.873 an ounce. Palladium fell $12.50, or 4.4 percent, to $270.50 an ounce. Platinum dropped $17, or 1.6 percent, to $1,024.50 an ounce.

To contact the reporter on this story: Danielle Rossingh in London at drossingh@bloomberg.net Pham-Duy Nguyen in Seattlet .

Last Updated: January 18, 2006 13:58 EST