London - Gold dropped in London, paring the first monthly advance since August, after the Federal Reserve reduced its stimulus and on speculation demand will slow in China before the Lunar New Year holiday.
The Fed said yesterday it will trim its monthly bond buying to $65 billion from $75 billion, sticking to its plan for a gradual withdrawal from an unprecedented easing policy.
Bullion rose 0.8 percent yesterday on concern a rout in emerging-market assets may deepen, spurring haven demand.
Increased physical demand in Asia helped gold rebound from a six-month low of $1,182.52 an ounce on December 31, when prices capped the biggest annual decline since 1981.
Chinese consumers traditionally buy the metal before the Lunar New Year, which begins tomorrow.
Volumes for the benchmark contract on the Shanghai Gold Exchange fell for a fifth day today to the lowest level since 2011.
“Once the Fed announced that tapering would continue with another $10 billion in cuts this month, gold pulled back,” David Govett, the head of precious metals at Marex Spectron Group in London, wrote today in a report.
In China, “the New Year holiday starts tomorrow, meaning less physical demand for the week ahead.”
Gold for immediate delivery fell 0.8 percent to $1,257.24 an ounce by 9:33 a.m. in London.
Prices climbed 4.3 percent this month.
Bullion for April delivery lost 0.4 percent to $1,257.40 on the Comex in New York, where futures trading volume was 42 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed.
The metal reached a two-month high of $1,279.61 on January 27.
Central banks from India to Turkey to South Africa raised borrowing costs this week to try to stem capital outflows.
“Investors have been selling out of emerging-markets since the Fed started tapering and while this has increased some safe- haven demand, less stimulus is also not positive for gold,” said Wang Xiaoli, chief investment strategist at CITICS Futures Co., a unit of China’s biggest listed brokerage.
“The risk lies to the downside as physical demand will be muted.”
Asians are the biggest buyers of gold, and financial markets in China, Hong Kong, Malaysia, Singapore, Taiwan and Indonesia will be shut tomorrow.
Holdings in gold-backed exchange-traded products rose from the lowest level since October 2009, gaining 3 metric tons to 1,739 tons yesterday, data compiled by Bloomberg show.
Silver for immediate delivery slid 1.7 percent to $19.4148 an ounce, reaching $19.2946, the lowest this year.
Palladium gained 0.3 percent to $716.70 an ounce.
Platinum lost 1.1 percent to $1,397 an ounce, reaching $1,393.50, the lowest since January 3.
While Anglo American Platinum Plc, Impala Platinum Holdings Ltd. and Lonmin Plc offered striking South African mineworkers a series of pay increases spread over three years, the Association of Mineworkers and Construction Union said it fails to meet demands.
At least 70,000 AMCU members have been on strike since January 23.
South Africa is the biggest platinum producer.
Platinum prices fell the past week partly on speculation mining companies have built stockpiles to meet lost output.
Anglo American and Impala can continue to fulfill customers’ orders for six to eight weeks, spokesmen for the Johannesburg-based companies have said. - Bloomberg News