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Gold Heads for First Weekly Drop in a Month on Stimulus Outlook

Jan. 17 (Bloomberg) -- Gold, little changed in New York, headed for the first weekly drop in a month as investors weighed the outlook for the Federal Reserve to cut stimulus and increased physical demand.

The Bloomberg Dollar Spot Index, a measure against 10 major currencies, traded near a four-month high as U.S. data on retail sales and New York manufacturing released this week beat economists’ estimates while initial jobless claims fell to the lowest in more than a month, backing the case for less stimulus.

The Fed decided in December to cut its monthly bond purchases to $75 billion from $85 billion, helping gold cap its first annual drop in 13 years. Increased demand from China, which celebrates the Lunar New Year at the end of January, helped bullion rise as much as 6.3 percent since setting a six- month low on Dec. 31.

“The timing and pace of stimulus reduction in the U.S. is keeping investors guessing, so every data point and Fed policy maker speech has the potential to move the gold market,” said Sun Yonggang, a macroeconomic strategist at Everbright Futures Co. “Physical demand in China has been good but it’s not enough to offset the negative sentiment toward gold this year.”

Bullion for February delivery added 0.3 percent to $1,243.70 on the Comex in New York by 8:27 a.m., where futures trading volume was 22 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed. It declined 0.3 percent this week, the first weekly drop since Dec. 20. Gold for immediate delivery rose 0.1 percent to $1,244.02.

Chinese Demand

Gold climbed to a one-month high of $1,255.30 on Jan. 13, on signs of strengthening demand in China, which probably overtook India as the largest user last year. Volumes for the benchmark contract on the Shanghai Gold Exchange exceeded 13,000 kilograms every day this week, compared with a daily average of about 11,525 kilograms in the fourth quarter.

Silver for delivery in March was little changed at $20.055 an ounce, set for a weekly drop. Palladium for the same month gained 0.2 percent to $745.15 an ounce. Platinum for April delivery added 0.8 percent to $1,442.40 an ounce.

Lonmin Plc and Impala Platinum Holdings Ltd., two of the world’s top three platinum producers, will start receiving strike notices within days after a South African union called for a stoppage over pay. The Association of Mineworkers and Construction Union, the biggest at the companies, will serve notice Jan. 20 and begin a strike at Lonmin Jan. 23 if demands aren’t met, Joseph Mathunjwa, the union’s president, said, without giving a date for an Impala walkout.

AMCU members at Anglo American Platinum Ltd., the largest producer, will gather Jan. 19 to decide whether to strike.

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