Gold fell for the first time in four days in London as the dollar strengthened and on speculation physical demand may slow after prices climbed to the highest in almost six weeks.
Gold reached $1,265.35 an ounce Monday, the highest since Dec. 10. The Bloomberg Dollar Spot Index, a measure against 10 major currencies, reached a four-month high and rose for a sixth day Wednesday before the Federal Open Market Committee meets Jan. 28-29.
Bullion slid 28 percent last year, the most since 1981, as some investors lost faith in the metal as a store of value. Federal Reserve policy makers said on Dec. 18 they would cut monthly bond purchases to $75 billion from $85 billion, with the pace of further reductions dependent on the performance of the economy. Stronger demand in China, which probably overtook India as the largest consumer last year, helped gold to rebound as much as 7 percent since setting a six-month low on Dec. 31.
“Gold has been aided higher by physical demand, which tends to pull back when prices go up,” said Zhu Siquan, an analyst at GF Futures Co., a unit of the Guangzhou-based firm that bought Natixis Commodity Markets Ltd. last year. “U.S. economic data and monetary policy, and subsequently the dollar, will continue to be the main drivers.”
Gold for immediate delivery fell 0.8 percent to $1,244.26 in London. Bullion for February delivery lost 0.6 percent to $1,243.80 on the Comex in New York, where futures trading volume was more than double the average for the past 100 days for this time of day, data compiled by Bloomberg showed.
U.S. markets were closed Monday for the Martin Luther King Jr. Day holiday and transactions will be booked Tuesday for settlement purposes.
Chinese consumers traditionally increase gold purchases before the Lunar New Year at the end of this month. Physical demand rose elsewhere this month, with the U.S. Mint selling 83,500 ounces of American Eagle gold coins so far in January, set for the biggest monthly total since April, mint data show.
“The market continued to benefit from moderate buying in Asia amid pre-holiday restocking in China,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote Tuesday in a report. “Investors will take a breather and book profits ahead of the FOMC statement at the end of the month.”
Silver for immediate delivery fell 1.9 percent to $19.9303 an ounce in London. Palladium lost 0.3 percent to $747 an ounce. Platinum slipped 0.9 percent to $1,455.49 an ounce, after reaching $1,472 Tuesday, the highest since Nov. 7. An ounce of platinum bought as much as 1.17 ounces of gold today, near yesterday’s level that was the most since June 2011.
The Association of Mineworkers and Construction Union, the South African union representing most workers at the world’s top three platinum companies and some of the largest gold mines in the nation served notice that its members will go on strike over wages.