April 28 (Bloomberg) -- Gold fell the most in three weeks in New York on concern that a swine-flu outbreak may delay a global economic recovery, cutting demand for the metal. Silver declined and platinum tumbled the most since December.

The World Health Organization raised a global alert to the highest ever and said swine flu can no longer be contained. The virus has spread to the U.S., Canada, Europe and New Zealand from Mexico, where 152 flu-related deaths have occurred. The International Monetary Fund forecast a 1.3 percent contraction for the world economy this year before the flu outbreak.

“The fear is there,” said Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago. That concern may postpone a recovery, curbing fabrication demand, he said. “Gold is falling because of its linkage to economic activity.”

Gold futures for June delivery dropped $14.60, or 1.6 percent, to $893.60 an ounce on the New York Mercantile Exchange’s Comex division. That’s the steepest drop for a most- active contract since April 6.

Analysts, including John Reade of UBS AG in London and Tom Pawlicki of MF Global Ltd. in Chicago, said the flu outbreak probably won’t have a significant impact on the gold market.

“We see no benefits to gold from this event,” Reade said today in an e-mailed note.

“This metal is hardly a safe haven from the possible economic consequences that may result from the pandemic,” Reade said. “There is a possible read through to silver, considering Mexico’s position as the second-largest producer of the metal and supplies could be interrupted if the virus continues to spread.”

Silver Falls

Silver futures for July delivery fell 55.9 cents, or 4.3 percent, to $12.426 an ounce on Comex, also the steepest drop for a most-active contract since April 6.

Platinum futures for July delivery plunged $48.70, or 4.2 percent, to $1,101.60 an ounce on Nymex. That was the most severe decline for a most-active contract since Dec. 1.

“Today’s fall-off-a-cliff move in platinum’s price has done serious damage to bull-trending forces,” said Ralph Preston, a commodity analyst at Heritage West Futures Inc. in San Diego.

“A push under $1,069 an ounce projects a move down to $1,039 and sets the stage for a test of $1,002,” Preston said in an e-mailed comment. “Only a close over $1,194 an ounce reinvigorates the bulls. Until then, the bears are free to run wild.”

Palladium futures for June delivery fell $12.20 or 5.3 percent, to $216.75 an ounce in New York, the sharpest dive for a most-active contract since Feb. 23.

Gold Trading

“The market may rightly or wrongly be trading on a relatively limited outbreak of swine flu,” Pawlicki said in an e-mailed report on gold. He said the virus is unlikely to change many investment plans.

Gold also fell after sales during India’s biggest bullion festival this week were lower than expected, Pawlicki said.

“Pressure was applied by reports of weak demand during the auspicious Akshaya Tritiya festival,” Pawlicki said in the report. “Early word from the Bombay Bullion Association was that rising prices and the economic slowdown have hit consumers’ spending capacity. Total gold sales were down between 20 percent and 40 percent.”

The association had expected India’s gold imports to double in April from 25 tons a year ago. Sales of almost 49 tons of gold bars, jewelry and coins were attributed to the 2008 festival, according to the World Gold Council.

Gold Outlook

Still, gold probably will rise this year and next, as economic turmoil around the world will boost investment demand, Gavin Wendt, a senior resources analyst at Fat Prophets Funds Management, said today in a Bloomberg Television interview. Gold has tripled since 2000, gaining each year through 2008.

“As stimulus packages that are being implemented around the world start to raise prospects of inflation,” demand for gold will increase, Sydney-based Wendt said. “That is going to be a factor over the next couple of years.”

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.

Last Updated: April 28, 2009 15:11 EDT