Gold Falls After Rally to Two-Week High as Dollar Gains

Holdings in gold contracts reached the highest in almost 22 months as investors added to bets that prices will drop. Futures fell.

The aggregate number of futures contracts yet to be closed, liquidated or delivered rose to 459,657 yesterday, the highest since Jan. 22, 2013. Money managers have boosted their short wagers to the highest in four weeks, while long holdings dropped to the lowest since January, government data show.

Investor appetite for bullion has ebbed as the dollar jumped to the highest since 2009 against a 10-currency basket and the Federal Reserve moved closer to its first U.S. interest-rate increase in eight years, cutting demand for the metal as an inflation hedge. Gold futures slumped to the lowest in four years this month, heading for a second straight annual loss.

“The data show that a lot of people have eliminated their long exposure and are piling up their short bets,” Bart Melek, the head of commodity strategy at TD Securities in Toronto, said in a telephone interview. “The market is clearly worried about increase in interest rates.”

Gold futures for December delivery lost 0.3 percent to settle at $1,193.90 an ounce today on the Comex in New York. The metal fell to $1,130.40 on Nov. 7, the lowest since April 2010.

Aggregate trading was more than double the 100-day average for this time, data compiled by Bloomberg show.

Bullion has declined for two straight months, the longest slump this year, as U.S. equities surged to a record and inflation failed to accelerate. Fed officials said last month that lower energy costs may hold down consumer costs in the near term.

Physical Demand

The Federal Open Market Committee released minutes from its October meeting today that showed officials said they should be on the lookout for signs of a decline in the public’s expectations for inflation. Policy makers ended their bond-buying program last month and cited an improving job market.

Gold climbed 70 percent from December 2008 to June 2011 as the Fed bought debt and held borrowing costs near zero percent.

Demand for jewelry, coins and bars increased after prices declined. Russia’s central bank bought about 150 metric tons of the metal this year, Governor Elvira Nabiullina said yesterday. Purchases were about 77 tons in 2013, International Monetary Fund data show. Trading of the Shanghai Gold Exchange’s benchmark bullion spot contract jumped this week

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