Gold Declines as Demand Dwindles for U.S. Inflation Hedge

Gold futures fell for the first time in three sessions after a report showed no change in the U.S. cost of living in November from a month earlier, reducing demand for the metal as a hedge against inflation.

Consumer prices rose 1.2 percent in the 12 months ended Nov. 30 after a 1 percent gain in the year ended Oct. 31, government data showed today. Core inflation, which excludes food and fuel, rose 0.2 percent last month from October,

“Metals markets need to see some inflation before they can rally because they’ve lost their appeal as an inflation hedge,” Chris Gaffney, the senior market strategist at EverBank Wealth Management in St. Louis, said in a telephone interview. “That’s taken a lot of buyers out of the market.”

Gold futures for February delivery declined 1.1 percent to settle at $1,230.10 an ounce at 1:45 p.m. on the Comex in New York. The metal climbed 1.6 percent in the previous two sessions.

Federal Reserve policy makers said after their September meeting that inflation persistently below the 2 percent objective may pose risks to economic performance.

Gold has tumbled 27 percent this year, heading for the first annual loss since 2000. Some investors lost faith in the metal amid a U.S. equity rally to a record and speculation that the Fed will curb its $85 billion in monthly bond purchases.

About 34 percent of economists surveyed by Bloomberg on Dec. 6 predicted that the Fed will start paring monetary stimulus as policy makers concludes a two-day meeting tomorrow.

Gold rose 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system.

Silver futures for March delivery declined 1.3 percent to $19.84 an ounce on the Comex.

On the New York Mercantile Exchange, palladium futures for March delivery dropped 2.1 percent to $701.05 an ounce after touching $698.40, the lowest for a most-active contract since Oct. 7.

Platinum futures for January delivery slid 1.1 percent to $1,344.60 an ounce.

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