Gold declined from a five-week high in London as a stronger dollar curbed demand for an alternative investment before Federal Reserve policy makers meet to discuss monetary policy.
The Bloomberg U.S. Dollar Index, a measure against 10 currencies, reached a one-week high as the Fed begins a two-day policy meeting. Bullion climbed to $1,361.93 an ounce yesterday, the highest since Sept. 20. Physical demand has been subdued, particularly in China, Standard Bank Group Ltd. said in a report yesterday.
Gold is set for the first annual drop in 13 years as some investors lost faith in the metal as a store of value. The 16-day partial U.S. government shutdown that began Oct. 1 probably trimmed 0.25 percentage point from fourth-quarter economic growth, President Barack Obama’s chief economic adviser said. Policy makers will delay cutting debt purchases until March, according to economists surveyed by Bloomberg on Oct. 17-18.
“The dollar will be one of the crucial factors for gold,” Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by phone. A stronger dollar may “point to a bit of profit-taking for gold. People will be looking at what the Fed says for hints about timing.”
Gold for immediate delivery fell 0.5 percent to $1,345.93 an ounce by 9:27 a.m. in London. Bullion for December delivery lost 0.5 percent to $1,345.20 on the Comex in New York. Futures trading volume was 5 percent above average for the past 100 days for this time of day, data compiled by Bloomberg showed.
Holdings in gold-backed exchange-traded products rose 0.2 metric ton from the lowest in more than three years to 1,881.6 tons yesterday, data compiled by Bloomberg show. Prices are heading for the third monthly gain in four, cutting this year’s drop to 20 percent.
The Federal Open Market Committee meets today and tomorrow to consider whether to start trimming the $85 billion-a-month of bond purchases. They unexpectedly refrained from slowing the debt buying last month.
“Investors wait for what the Fed may say about quantitative easing and the timing of a reduction in stimulus,” said Wang Xiaoli, chief investment strategist at CITICS Futures Co., a unit of China’s biggest listed brokerage.
Silver for immediate delivery fell 0.5 percent to $22.3878 an ounce in London. Palladium slipped 0.5 percent to $743.22 an ounce. Platinum lost 0.3 percent to $1,466 an ounce, after reaching $1,474.13 yesterday, the highest since Sept. 19.
The largest labor group at Impala Platinum Holdings Ltd.’s South African operations said it will go on strike at the world’s biggest platinum mine. Impala hasn’t received a strike notice from the union yet and is “hopeful that talks will continue and that we could still avert the strike,” said Johan Theron, a spokesman for the company.
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