Gold headed for its first weekly drop in three as crude oil fell, curbing demand for the precious metal as an inflation hedge.

Gold has declined more than 20 percent from the 26-year high it reached in May as energy prices tumbled on an increase in inventory. Crude oil, gasoline, heating oil, diesel and natural gas supplies last week were above the five-year average for the period, the Energy Department said on Oct. 4.

``We have been taking direction from the external factors, primarily crude,'' David Holmes, director of precious metals at Dresdner Kleinwort Group in London, said today by telephone. Holmes, who was the most accurate gold-price forecaster among 31 analysts surveyed by the London Bullion Market Association last year, recommends holding gold next week.

Gold for immediate delivery fell $3.70, or 0.6 percent, to $570.60 at 12:26 p.m. London time. Bullion has fallen 4.6 percent so far this week. Gold futures for December delivery on the Comex division of the New York Mercantile Exchange fell 70 cents to $574. 80

Bullion, up 15 percent this year, traded at $730.40 on May 12, the highest since 1980, amid rising oil prices, political tension over Iran's and North Korea's nuclear programs and a surge of funds into commodities. Oil futures fell 0.4 percent to $59.65 a barrel in electronic trading on Nymex today.

Oil-Price Trend

``Gold prices will follow oil movements next week, as they have been tracking the oil-price trend this week,'' said Hiroyuki Kikukawa, deputy general manager of research at Nihon Unicom Corp. in Tokyo.

The correlation between crude oil and gold was 0.6 in the second and third quarters this year, compared with 0.4 in the first three months.

OPEC may hold an emergency meeting in Vienna on Oct. 18-19 to consider cutting supply, and Saudi Arabia, its biggest exporter, would back a consensus, the London-based al-Hayat newspaper said today, citing an unidentified OPEC official.

Nigeria and Venezuela have announced cutbacks totaling 170,000 barrels a day last week and other OPEC countries are considering reductions to prop up prices.

Gold's five-day moving average price has been trading below its 200-day moving average since Sept. 13, suggesting bullion may have slipped into a declining trend, some traders said. Its five-day moving average is $576.92 an ounce, compared with the 200-day figure of $600.80.

Spot gold prices touched $559.40 an ounce on Oct. 4, the lowest since June 15.

``Liquidation by funds will continue as there are no recovery signals on the horizon,'' said Kishore Narne, head of research at Anand Rathi Commodities Ltd. in Mumbai. Narne expects gold to drop to $535-540 in two to three weeks.

Among other precious metals, silver fell 6 cents to $11.09 an ounce. Platinum dropped to $1,079.50 an ounce and palladium was unchanged at $298.