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Gold Falls Most in Three Weeks, Silver Slumps on Fed Bets

Oct. 31 (Bloomberg) -- Gold posted the biggest loss in almost three weeks and silver had the largest slump in more than a month as the Federal Reserve fueled speculation that it will trim U.S. monetary stimulus sooner than anticipated.

The economy shows signs of “underlying strength,” Fed policy makers said yesterday. The statement pointed to the possibility of reduced bond purchases as soon as December, Citigroup Inc. and Barclays Plc said. The dollar headed for the longest rally in eight weeks against a basket of 10 currencies.

“The tapering has to come at some point and will be sooner than later,” David Lee, a vice president at Heraeus Precious Metals Management in New York, said in a telephone interview. “The dollar’s strength is working against gold.”

Gold futures for December delivery fell 1.9 percent to settle at $1,323.70 an ounce at 1:44 p.m. on the Comex in New York, the biggest drop for a most-active contract since Oct. 11. This month, the price fell 0.2 percent.

The odds that the Fed will scale back $85 billion in monthly debt purchases in January rose to 45 percent from 25 percent before the latest statement by policy makers, Citigroup said. Economists surveyed by Bloomberg last week predicted tapering in March.

This year, gold has slumped 21 percent, heading for the first annual loss since 2000. Some investors lost faith in the metal as a store a value amid a U.S. equity rally to a record and tame inflation.

Silver, Platinum

Silver futures for December delivery tumbled 4.9 percent to $21.867 an ounce, the biggest slump since Sept. 20. The metal, up 0.7 percent this month, has plunged 28 percent in 2013.

On the New York Mercantile Exchange, platinum futures for January delivery fell 2.1 percent to $1,448.40 an ounce, the biggest drop since Sept. 20.

This month, the metal climbed 2.5 percent. South Africa’s National Union of Mineworkers said today it would strike at Northam Platinum Ltd. on Nov. 3.

The deadline raised concern that labor turmoil will escalate in South Africa, the world’s top producer. Another union group voted to strike at the biggest mine, owned by Impala Platinum Holdings Ltd.

Palladium futures for December delivery fell 1.7 percent to $736.80 an ounce on the Nymex. The price rose 1.3 percent this month.

To contact the reporter on this story: 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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