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Gold Falls From 3-Month High as Buying Slows Before Fed Minutes

Feb. 19 (Bloomberg) -- Gold fell from a three-month high in New York on speculation of slowing demand before the Federal Reserve releases minutes of its latest meeting. Silver futures declined after the longest run in more than three decades.

Volume for Shanghai’s benchmark spot gold contract fell 38 percent today and was about half the Feb. 10 level, bourse data show. China overtook India as the biggest buyer last year. The U.S. Mint has sold 15,000 ounces of American Eagle gold coins in February, compared with 91,500 ounces for all of January.

Gold climbed 9.6 percent this year as signs that the U.S. economy wasn’t recovering in line with expectations boosted demand for a haven. The U.S. central bank will release minutes of its January meeting today as investors look for the stance of policy makers after New York manufacturing data trailed estimates and U.S. factory output fell.

“Physical demand is minimal,” David Govett, the head of precious metals at Marex Spectron Group in London, wrote today in a report. Traders are “waiting for various figures this afternoon and more importantly, the minutes from last month’s FOMC meeting. Market participants will be scouring them for any indications about the pace of tapering.”

Bullion for April delivery declined 0.5 percent to $1,317.30 an ounce by 7:36 a.m. on the Comex in New York. It reached $1,332.40 yesterday, the highest since Oct. 31. Futures trading volume was 11 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed. Gold for immediate delivery lost 0.3 percent to $1,317.47.

Gold’s Drop

Gold fell 28 percent last year, the most since 1981, as U.S. equities advanced and exchange-traded product holdings fell. The Fed said in December that it would start paring stimulus by cutting its monthly bond purchases by $10 billion per month, and it decided on another reduction of the same size last month, to $65 billion. Fed Chair Janet Yellen said on Feb. 11 that while the labor-market recovery is far from complete, stimulus would be cut in “measured steps.”

“The long-term driver of gold is tapering,” said Steven Dooley, head of research at Forex Capital Trading Pty in Melbourne. In line with Yellen’s comments in Congress, the Fed is “saying ‘we’re going to wind back on stimulus measures as per the tapering timetable and stick to that’,” he said.

Silver for delivery in March slipped 0.7 percent to $21.755 an ounce. It reached $21.98 yesterday, the highest since Nov. 7, as it gained for 11 consecutive sessions in the longest run since 1979. Spot silver rose for 13 days through yesterday in the longest streak since at least 1968.

Palladium for delivery in March lost 0.1 percent to $736.30 an ounce. Platinum for April delivery fell 0.2 percent to $1,422.10 an ounce.

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