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Gold Is Little Changed Below Three-Week High as Tensions Weighed

Aug. 11 (Bloomberg) -- Gold was little changed in New York trading below a three-week high as investors weighed signs tension in Ukraine and the Middle East is easing.

Global equities rose for a second day after Russia said warplanes ended drills near Ukraine and Israel and militants in the Gaza Strip agreed to an Egyptian-brokered truce. Geopolitical unrest helped gold gain 9 percent this year, with prices reaching a three-week high of $1,324.30 an ounce on Aug. 8 as U.S. President Barack Obama authorized air strikes in Iraq.

The dollar touched an almost six-month high against 10 major currencies on Aug. 6 on demand for a haven and the outlook for a strengthening U.S. economy. The Federal Reserve is cutting stimulus that helped gold reach a record in 2011. Futures traders are pricing in a 69 percent chance of an increase in the Fed’s benchmark rate to at least 0.5 percent by September 2015.

“Any signs that the crises could be de-escalating would threaten the recent rally in gold and render the metal vulnerable to a slide,” Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., said in a report today. Data “continued to suggest that the U.S. economy is recovering. If the dollar continues strengthening, the upward thrust in gold is likely to be curtailed.”

Gold for December delivery was little changed at $1,310.60 an ounce by 7:49 a.m. on the Comex in New York. Bullion for immediate delivery dropped 6 cents to $1,309.52 in London, according to Bloomberg generic pricing.

Trading Volume

Futures trading volume was 43 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg show.

Ukraine’s military demanded that pro-Russian rebels surrender and dismissed their offer of a cease-fire as lawmakers prepared to consider sanctions that may curb Russian shipments of natural gas to Europe.

“While it appears as though concerns are fading, as long as geopolitical risks still exist in the background, gold will continue to be supported,” said Zhu Siquan, an analyst at GF Futures Co. from Guangzhou, China. “We’ll get some buying on headlines but we’re not going to see large investor interest.”

Holdings in gold-backed exchange-traded products fell 7.4 metric tons last week, the most since June, and reached a one- month low of 1,726.7 tons on Aug. 8, data compiled by Bloomberg show.

Silver for September delivery lost 0.2 percent to $19.91 an ounce in New York. Platinum for October delivery fell 0.4 percent to $1,472.80 an ounce. Palladium for September delivery rose 0.3 percent to $862.95 an ounce.

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 Bruce Stanley

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