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Gold Extends Drop as Fed Shunning Stimulus Helps Dollar

Published: April 4, 2012 | 7:30 am
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Gold dropped for a second day as the Federal Reserve holds off increasing monetary stimulus unless economic growth slows, boosting the dollar and damping demand for assets priced in the U.S. currency.

Spot gold fell as much as 0.3 percent to $1,641.15 an ounce, and traded at $1,643.57 at 12:16 p.m. in Singapore. Bullion dropped 1.9 percent yesterday, the most in a month, as the Dollar Index, a measure of the greenback versus six major peers, rose 0.7 percent. The gauge was little changed today.

Minutes from a March 13 meeting released yesterday showed central bankers saw no need for further monetary accommodation unless the economy lost momentum or if inflation seemed likely to remain below 2 percent, sending equities and treasuries lower. June-delivery gold declined for a second day, losing as much as 1.8 percent to $1,642.10 an ounce on the Comex in New York, before trading at $1,644.80.

“We do not think gold will be doing much over the course of April, as there is no pressing reason to force the complex to break out one way or another,” Edward Meir, an analyst at INTL FCStone, wrote in a report. “Although there are increasing signs of a global slowdown, potentially bullish for gold, the deceleration is not pronounced enough to prompt a new wave of central bank easing.”

While manufacturing and the job market is improving in the U.S., Europe is sliding into recession as the region’s fourth quarter gross domestic product contracted for the first time since 2009. China’s economy may have expanded about 8.4 percent in the first quarter, the least since the first half of 2009, according to an estimate given by an official of the National Development and Reform Commission yesterday.

India Strike
In India, jewelers extended a nationwide strike for an 18th day yesterday to protest a levy on non-branded ornaments, the All India Gems & Jewellery Trade Federation said. While demand last year was the largest on an annual basis, it may be exceeded by China this year, the World Gold Council estimates.

“The current state of the Indian domestic gold market can potentially dampen gold prices in the medium to longer term,” said Lachlan Shaw, an analyst at Commonwealth Bank of Australia. (CBA)

Spot platinum dropped 0.1 percent to $1,639.75 an ounce, after gaining 0.3 percent. It’s the year’s best-performing precious metal as South African supplies were disrupted amid improved demand. U.S. sales of cars and light trucks rose 13 percent in March, sending the industry to the best quarterly pace since 2008, according to researcher Autodata Corp. Platinum and palladium are used in catalytic converters.

Cash palladium retreated for a second day, losing 0.4 percent to $651.50 an ounce. Silver fell 0.9 percent to $32.3525 an ounce, extending yesterday’s 1 percent drop.

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