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Gold Trades Near Two-Week High as Fed Stimulus to Dollar Weighed

April 11 (Bloomberg) -- Gold traded near a two-week high in New York, heading for a weekly advance, as investors weighed the outlook for U.S. stimulus and tension in Ukraine against signs of slowing demand from China.

Gold futures reached $1,324.90 an ounce yesterday, the highest since March 24, a day after minutes of the Federal Reserve’s March meeting showed that several policy makers said projections for an interest-rate rise might be overstated. Fed Chair Janet Yellen said last week that the economy will need stimulus for “some time,” after saying in March that rates might start to rise about six months after monthly asset purchases end.

The Bloomberg Dollar Spot Index, a measure against 10 major currencies, was little changed near a five-month low. Gold reached a six-month high on March 17 amid turmoil over Ukraine, and the U.S. threatened Russia with more sanctions for its incursion into its neighbor. Volume for the benchmark gold contract in China, the largest user, was about 38 percent less than three weeks ago, Shanghai Gold Exchange data show.

“The gold price is continuing to find support from the unexpectedly dovish Fed minutes from mid-week because the US dollar has been tending towards weakness ever since,” analysts at Commerzbank AG wrote in a report today. “Because physical demand is also generating little impetus at present, the latest price rise is likely to have been driven predominantly by speculation.”

Gold for June delivery added 0.2 percent to $1,322.70 by 7:26 a.m. on the Comex in New York. The metal rose 1.5 percent this week, the most in a month. Futures volume was 21 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed. Bullion for immediate delivery gained 0.3 percent to $1,322.39 in London, according to Bloomberg generic pricing.

Interest Rates

“You’ll see support for the gold price if the U.S. aren’t going to lift interest rates in the short-term as aggressively as people expected and there’s still anxiety between Russia and Ukraine,” Tom Price, an analyst at UBS AG, said in a Bloomberg Television interview from Sydney.

Silver for May delivery was little changed at $20.09 an ounce in New York. Platinum for July delivery added 0.1 percent to $1,461.60 an ounce, reaching a three-week high of $1,464.90. Palladium for June delivery rose 0.5 percent to $796.35 an ounce. It climbed to $802.45 on March 24, the highest since August 2011.

Russia is the biggest supplier of palladium. The standoff between the country and the U.S. and its European allies is dominating talks of finance chiefs gathering for the spring meetings of the International Monetary Fund and World Bank, which start today.

U.S. Treasury Secretary Jacob J. Lew delivered the warning on additional sanctions in talks with his Russian counterpart, Anton Siluanov. It was made just hours after Russian President Vladimir Putin threatened to halt natural gas shipments to Ukraine.

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

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