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Gold Futures Advance to Two-Week High as Fed Minutes Spur Demand

April 10 (Bloomberg) -- Gold rose to a two-week high in New York as U.S. Federal Reserve minutes played down forecasts by some of the bank’s own policy makers that interest rates might rise faster than they previously predicted.

The minutes released yesterday of the March meeting, at which monthly bond buying was cut for a third time, showed that several policy makers said projections for an interest-rate increase might be overstated. Chair Janet Yellen said last month that rates might start to rise about six months after the central bank halts its monthly asset purchases.

The Bloomberg Dollar Spot Index, a measure against 10 major currencies, reached a five-month low today. Gold gained 10 percent this year, rallying from the biggest annual drop in three decades. Prices reached a six-month high on March 17 as turmoil over Ukraine spurred demand for a haven.

Gold has been “underpinned by the FOMC minutes, which were not as hawkish as the FOMC statement was,” Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., said in a report. Bullion was also “bolstered by weakness in the dollar. Market participants will keep a very close eye on U.S. data to gauge whether the Fed might consider raising rates sooner rather than later.”

Gold for June delivery climbed 1.3 percent to $1,322.90 an ounce by 7:44 a.m. on the Comex in New York. It reached $1,324.30, the highest since March 24. Futures volume was 18 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg showed. Bullion for immediate delivery increased 0.8 percent to $1,322.34 in London, according to Bloomberg generic pricing.

Fed Stimulus

The Fed in March reduced the monthly pace of purchases by $10 billion, to $55 billion, and repeated it is likely to continue cutting in “further measured steps.” It’s kept its target for overnight bank lending in a range of zero to 0.25 percent since 2008. Even after rates rise, officials said last month, they might have to be kept at levels considered below normal for longer because of tighter credit, higher savings and slower growth in potential output.

“While it is almost certain the Fed will continue to reduce monthly asset purchases, there is much less certainty as to when interest rates will start to increase,” said Wang Xiaoli, chief investment strategist at CITICS Futures Co. in Shenzhen, a unit of China’s biggest listed brokerage. “That’s giving some support to gold prices.”

Silver for May delivery climbed 2.3 percent to $20.225 an ounce in New York. Platinum for July delivery rose 1.4 percent to $1,458.60 an ounce, reaching a three-week high of $1,459.70. Palladium for June delivery gained 0.9 percent to $789.30 an ounce. It climbed to $802.45 on March 24, the highest since August 2011.

South Africa’s platinum-group metals output dropped the most in two years in February after a strike at the world’s three biggest producers crippled output.

To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net; Claudia Carpenter at ccarpenter2@bloomberg.net John Deane, Nicholas Larkin

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