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Gold Holds Below 3-Week High Before Fed Minutes, U.S. Job Data

Jan. 8 (Bloomberg) -- Gold held below a three-week high in New York as investors awaited U.S. data that may strengthen the dollar and boost the case for the Federal Reserve to slow stimulus. Silver declined.

The Bloomberg Dollar Spot Index, a measure against 10 major currencies, traded near an almost four-month high before the U.S. central bank releases minutes of its December meeting. The ADP Research Institute may say today that private payrolls in the U.S. rose by 200,000 workers last month, according to the median estimate of economists compiled by Bloomberg.

The Federal Open Market Committee decided at the Dec. 17-18 meeting to cut monthly bond purchases to $75 billion from $85 billion starting this month, and San Francisco Fed President John Williams said yesterday the program may end this year. Bullion slid 28 percent last year, the most since 1981, as some investors lost faith in the metal as a store of value. Prices rose as much as 5.6 percent since setting a six-month low on Dec. 31, partly as physical demand increased in China.

There’s been “a noted lack of physical demand and prices have slipped back,” David Govett, the head of precious metals at Marex Spectron Group in London, wrote today in a report. The ADP data and Fed minutes “will deter buyers from the market for the time being as both are expected to be dollar-positive.”

Bullion for February delivery lost 0.2 percent to $1,226.90 an ounce by 7:37 a.m. on the Comex in New York. It reached $1,247.70 on Jan. 6, the highest since Dec. 16. Futures trading volume today was 12 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed. Gold for immediate delivery fell 0.3 percent to $1,228.19 in London.

Fed Stimulus

Holdings in gold-backed exchange-traded products are at the lowest since October 2009, data compiled by Bloomberg show. The Fed will probably reduce its bond purchases in $10 billion increments over the next seven meetings before ending the program in December 2014, according to the median forecast in a Bloomberg survey of economists last month.

The ADP Research Institute may say that U.S. payrolls rose after gaining 215,000 in November. The Labor Department’s nonfarm payrolls data is scheduled for Jan. 10.

“Employment growth is one of the key pieces of data to determine their action,” said Ric Spooner, chief markets analyst at CMC Markets in Sydney, referring to the Fed. “A strong employment number would translate into some U.S. dollar strength which would be a negative for the gold market.”

Silver futures for March delivery fell 1.1 percent to $19.565 an ounce in New York. Platinum for April delivery lost 0.2 percent to $1,413 an ounce. Palladium futures for March delivery declined 0.8 percent to $735.50 an ounce. They reached $744.75 yesterday, the highest since Dec. 10.

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