NEW YORK: Gold prices fell more than 1 percent Thursday on signs that Federal Reserve officials are increasingly concerned about the risks of the Fed's asset purchases on financial markets, reducing bullion's appeal as a hedge against inflation.
Minutes from the Fed's December policy meeting showed a growing reticence about further increases in the central bank's balance sheet, which was expanded sharply in response to the financial crisis and recession of 2007-2009.
The minutes also showed several officials thought it would be appropriate to slow or stop asset purchases well before the end of 2013, citing concerns about financial stability and the size of the balance sheet.
"With the news that some policymakers suggested that the Fed could withdraw QE before the end of year, that put a dent on one of the underpinnings on gold, which is expansionary monetary policy," said Mark Luschini, chief investment strategist of Janney Montgomery Scott, a broker-dealer which manages $54 billion in assets.
Economic fears due to unprecedented Fed monetary stimulus, including printing money to buy assets - known as quantitative easing - has been a key driver in boosting gold, a traditional inflation hedge.
Spot gold was down 1.2 percent at $1,665.60 by 2:45 p.m. EST (1945 GMT).
US COMEX gold futures for February delivery were down $14.20 an ounce at $1,674.60, with volume in line with its 30-day average, preliminary Reuters data showed.
On Dec. 31 gold closed up 7 percent from a year earlier, its 12th consecutive yearly gain.
Among other precious metals, silver was down 1.8 percent to $30.40 an ounce on Thursday, platinum edged up 0.2 percent to $1,564.24, and palladium dropped 1.9 percent to $689.25 an ounce.
Center>Copyright Reuters, 2013
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