Gold Drops From Three-Week High as Investors Weigh Fed, Cyprus

Gold futures dropped from a three- week high, as investors awaited the Federal Reserve’s latest policy statement, and amid concern that Europe’s debt crisis may worsen.

The Fed will end a two-day policy meeting today in Washington. Gold declined 3.8 percent this year through yesterday on signs that an improving U.S. economy would reduce the need for central-bank stimulus. The European Central Bank pledged to provide liquidity to Cyprus after the nation’s lawmakers rejected an unprecedented levy on bank deposits yesterday. The vote threw into limbo a rescue package designed to keep Cyprus in the euro.

“The market is in a wait-and-watch mode ahead of the Fed statement,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “The Europe concerns are providing some support.”

Gold futures for April delivery slipped 0.3 percent to $1,606.70 an ounce at 10:45 a.m. on the Comex in New York. Bullion reached $1,615 yesterday, the highest since Feb. 26, and advanced 1.4 percent in the past four sessions.

Chairman Ben S. Bernanke will probably start reducing the Fed’s $85 billion in monthly bond buying no earlier than the fourth quarter of 2013, economists said in a Bloomberg survey. Minutes of the previous meeting released on Feb. 20 showed some policy makers said the central bank should be ready to vary the pace of its monthly purchases.

Silver futures for May delivery fell 0.4 percent to $28.725 an ounce in New York.

Futures trading was 56 percent below the average in the past 100 days for this time of day.

To contact the reporters for this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Debarati Roy in New York at droy5@bloomberg.net;

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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