Gold Falls for Second Day on Fed Stimulus Stance

Gold fell to a 12-week low on signs that the Federal Reserve won’t provide more U.S. economic stimulus, boosting the dollar and eroding the appeal of precious metals as alternative investments. Silver tumbled 6.7 percent.

The Fed will hold off on increasing monetary accommodation unless economic expansion falters, according to minutes of a March 13 policy meeting released yesterday. The dollar rose to a one-week high against a basket of six major currencies, and the euro slumped on Spain’s debt woes.

“The market has decided that yesterday’s statement is probably the final nail in the coffin” for additional Fed stimulus, Frank Lesh, a trader at FuturePath Trading in Chicago, said in a telephone interview. “Gold is reacting to the strength in the dollar.”

Gold futures for June delivery fell 3.5 percent to settle at $1,614.10 an ounce at 1:35 p.m. on the Comex in New York, the biggest drop for a most-active contract since Feb. 29. Earlier, the metal touched $1,613, the lowest since Jan. 10.

On Feb. 29, gold plunged as much as $100 after Fed Chairman Ben S. Bernanke, testifying before Congress, gave no signal that the central bank would take new steps on monetary stimulus.

Gold has surged 83 percent since the end of 2008 as the Fed held borrowing costs at a record low and bought $2.3 trillion in housing and government debt.

Silver Tumbles

Silver posted the biggest decline among 24 raw materials in the Standard & Poor’s GSCI Spot Index. Nickel, copper and lead also slumped.

“The move is more pronounced in silver as people look at silver both as an industrial metal as well as a precious metal,” Gijsbert Groenewegen, a partner at Silver Arrow Capital Management in New York, said in a telephone interview.

Silver futures for May delivery plunged $2.221 to $31.044 an ounce on the Comex. Earlier, the metal touched $30.98, the lowest since Jan. 20. The percentage drop was the biggest since Feb. 29.

On the New York Mercantile Exchange, platinum futures for July delivery dropped 3.7 percent to $1,598.60 an ounce, the biggest drop since Dec. 14. Earlier, the price touched $1,598, the lowest since Feb. 1.

Palladium futures for June delivery fell 4.1 percent to $632.75 an ounce on the Nymex. Earlier, the metal touched $630.75, the lowest since Jan. 13.

To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net