Gold Extends Decline as Investors Weigh Fed Comments, ETP Drop

Gold fell, extending the biggest drop in two weeks, as investors reduced holdings in bullion-backed exchange-traded products amid concern the Federal Reserve may scale back its stimulus program.

Bullion for immediate delivery declined as much as 0.6 percent to $1,448.93 an ounce, and was at $1,453.65 at 10:08 a.m. in Singapore. The metal retreated 1.3 percent yesterday, the most since April 15, when prices plummeted 9.1 percent in the biggest drop since 1983. Gold capped its worst month of losses since December 2011 in April after plunging into a bear market.

The Fed said yesterday that it was ready to raise or lower its monthly asset purchases as economic conditions evolve, in contrast with a discussion of the timing of a reduction in the pace of buying at the central bank’s March meeting. Gold ETP assets fell to 2,272.281 metric tons yesterday, the least since October 2011, according to data compiled by Bloomberg.

“ The Fed’s message yesterday could have been interpreted as positive for gold but it also reminded investors of the possibility of less stimulus should the economy show steady improvement,” said Yang Shandan, a senior trader at Cinda Futures Co., a unit of one of four funds in China created to buy bad debt from banks. “The price drop comes as Chinese buyers return to the market, which may limit declines.”

Gold rallied for 12 years through 2012 as central banks around the world including the Fed ramped up stimulus to spur growth. While prices are 6.9 percent below the April 11 close of $1,561.45 that preceded the rout, they have rebounded from a two-year low of $1,321.95 on April 16 as coin and jewelry demand expanded from the U.S. to China and India.

Annual Drop

Gold for June delivery rose as much as 0.9 percent to $1,459.80 an ounce on the Comex in New York before trading at $1,450.10. Prices will close the year at $1,550, 7.5 percent less than at the end of 2012 and the biggest drop since 1997, according to the median of 38 estimates compiled by Bloomberg.

Bullion of 99.99 percent purity lost as much as 1.4 percent to a one-week low of 292.25 yuan a gram ($1,476.54 an ounce), as the market reopened after a three-day break, and was at 292.5 yuan. The volume for the benchmark contract on the Shanghai Gold Exchange, China’s biggest cash market, was more than four times last year’s daily average every day since April 16.

Silver fell 0.6 percent to $23.489 an ounce, platinum was 0.8 percent lower at $1,464.80 an ounce, and palladium decreased 0.6 percent to $683.65 an ounce.

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