Gold falls from five-week high as dollar gains before Fed meets

Gold futures (COMEX:GCZ13) declined from a five-week high as the dollar’s rally curbed demand for the metal as an alternative investment before Federal Reserve policy makers meet on U.S. monetary policy.

The greenback rose to a one-week high against a basket of 10 currencies (NYBOT:DXZ13) as the Fed begins a two-day policy meeting. Wholesale prices unexpectedly dropped in September, curbing the appeal of gold as a hedge against inflation. Energy futures also fell today.

“A lack of fresh, bullish fundamental news is keeping buyers scarce,” Jim Wyckoff, a senior analyst at Kitco Inc., a research company in Montreal, said in a report. “The key ‘outside markets’ are also in a bearish daily posture for the precious metals -- a firmer U.S. Dollar Index and weaker crude- oil prices.”

Gold futures for December delivery fell 0.3% to $1,348.20 an ounce at 9:41 a.m. on the Comex in New York. Yesterday, the price reached $1,361.80, the highest for a most- active contract since Sept. 20.

The Fed’s Open Market Committee meets today and tomorrow to consider whether to start trimming $85 billion a month in bond purchases. Policy makers will delay scaling back stimulus until March, according to economists surveyed last week by Bloomberg.

Through yesterday, gold slumped 19% this year, heading for the first annual drop 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.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, have tumbled 35% this year. Last week, the assets dropped to the lowest since February 2009.

Silver futures for December delivery rose 0.1% to $22.555 an ounce on the Comex.

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