Gold declined for a second day in London as a stronger dollar curbed demand for the metal as an alternative investment.
The dollar climbed to the highest level in almost two weeks versus the euro on concern that Europe's sovereign-debt crisis may worsen. Gold typically moves inversely to the greenback. The Federal Reserve should be ready to consider more monetary easing even while it can't be expected to eliminate some of the forces impeding economic growth, Fed Bank of Atlanta President Dennis Lockhart said yesterday.
"Maybe it's the stronger dollar that is hurting the price a little bit," Daniel Briesemann, an analyst at Commerzbank AG, said today by phone from Frankfurt. Still, "gold should remain well supported. Investment demand for gold seems to be relatively robust."
Immediate-delivery gold fell $7.25, or 0.4 percent, to $1,818.47 an ounce by 10:49 a.m. in London. The metal reached a record $1,913.50 on Aug. 23 and climbed 12 percent in August, its best monthly performance since November 2009. Gold for December delivery was 0.6 percent lower at $1,821.50 on the Comex in New York.
Bullion is in the 11th year of a bull market, the longest winning streak since at least 1920 in London, as investors seek to diversify away from equities and some currencies. The metal is up 28 percent this year, outperforming global stocks, commodities and Treasuries.
Minutes of the Aug. 9 Fed meeting showed policy makers favored "more substantial" measures to boost the U.S. economy than the current pledge to hold rates at a record low for the next two years. The Fed bought $600 billion in Treasuries from November through June. Reports this week may show U.S. manufacturing contracted for the first time in two years and employment slowed in August.
"Any further policy easing is gold-supportive here, with U.S. currency yields set to remain ultra low, which could only serve as a short-term psychological boost to the broader market," Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a report. "The broader market is still hoping for QE3 while bracing itself ahead of" economic data due to be released today and tomorrow, he said.
Exchange-traded-product holdings were little changed at 2,144.5 metric tons yesterday, data compiled by Bloomberg show. Assets reached a record 2,216.8 tons on Aug. 8.
The U.S. Mint sold 112,000 ounces of American Eagle gold coins last month, up 74 percent from July and the most since January, its website showed. Silver coin sales advanced 24 percent to 3.68 million ounces.
Silver for immediate delivery fell 0.2 percent to $41.4688 an ounce. Platinum was down 0.3 percent at $1,841.35 an ounce. Palladium slipped 0.9 percent to $776.75 an ounce.
--With assistance from Glenys Sim in Singapore. Editor: John Deane
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2bloomberg.net.