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Gold declines for second day

Gold declined for a second day, after reaching a record last week, as a strengthening dollar eased demand for the metal as an alternative investment.

Bullion for immediate delivery dropped 0.5pc to $1,361.32 an ounce at 2:05pm Seoul time.

The metal reached a record $1,387.35 on October 14 as the dollar fell on speculation the Federal Reserve will take more stimulus measures amid low inflation and an unemployment rate near 10pc.

“For the time being we are just waiting for more significant data and further rhetoric from the Fed,” Darren Heathcote, head of trading at Investec Bank (Australia) Ltd, said today by phone from Sydney. “Gold is off the peak, but you are bound to get some profit-taking,” he said.

Builders in the US probably started fewer homes in September, while production rose for a seventh month, signaling growth may be uneven, economists said before reports this week.

Fed Chairman Ben Bernanke said October 15 that the bank may expand asset purchases, while saying “nonconventional policies” have costs and limitations.

December-delivery gold on the Comex in New York fell 0.7pc to $1,362.10 an ounce. Futures have advanced 24pc this year and reached a record $1,388.10 an ounce on October 14.

The dollar rose 0.4pc against a basket of six currencies, gaining for a second day. The greenback traded at $1.3893 per euro from $1.3977 on October 15, when it earlier reached the weakest level since January. Bullion typically moves in the opposite direction to the US currency.

Net-long positions

Hedge-fund managers and other large speculators decreased their net-long position in New York gold futures in the week ended October 12, according to US Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 255,874 contracts on the Comex. Net-long positions fell by 3,746 contracts, or 1pc, from a week earlier.

China is forecast to produce 340 metric tons of gold this year, increasing from 2009, Zhang Fengkui, section chief of the raw materials department at the Ministry of Industry and Information Technology, said on October 16 at a conference, without providing the scale of the increase.

China’s gold output last year reached 314 tons, the China Gold Association said in January.

Silver fell 1.5pc to $23.9675 an ounce at 2:09pm Seoul time after reaching $24.92 on October 14, the highest level for 30 years.

The metal may trade between $20.50 and $25.50 for the remainder of the year, Philip Klapwijk chairman of London-based research company GFMS Ltd, said October 16.

“Our view is silver is likely nearing a top now, and that it has more downside in the short term than upside, he said. “But we remain bullish in the long term.”

Platinum fell 0.6pc to $1,685.25 an ounce, while palladium declined 1.7pc to $579.50 an ounce after reaching a nine-year high of $605.13 last week.

US housing starts data will be released by the Commerce Department tomorrow. A Federal Reserve report is forecast to show output at the nation’s factories, mines and utilities increased 0.2pc for a second month, according to economists surveyed by Bloomberg News.