By Claudia Carpenter and Glenys Sim April 28 (Bloomberg) -- Gold fell in London on speculation economic growth will erode demand for the precious metal as an alternative asset. Federal Reserve officials today may indicate the U.S. recovery is strengthening. Gold rose to a four-month high yesterday after Standard & Poor’s lowered Greece’s and Portugal’s credit ratings, spurring demand for the metal. “In the short term, there may be safe-haven buying, but I don’t think that will be as important in the weeks ahead,” said Daniel Smith, an analyst at Standard Chartered Plc in London. “The Greece issue won’t derail economic recovery.” Gold for immediate delivery dropped $4.85, or 0.4 percent, to $1,163 an ounce at 11:30 a.m. local time. The futures for June delivery were little changed at $1,163.30 on the Comex in New York. Goldman Sachs Group Inc. said it reduced its gold forecasts because of expectations that a “broadening economic recovery” will lead to higher U.S. interest rates. Gold will average $1,165 an ounce this year and $1,350 in 2011, Eugene King, Peter Mallin-Jones and Andrew Byrne said in a report dated yesterday. In January, the company’s forecasts were $1,265 an ounce for 2010 and $1,425 an ounce for 2011. The dollar rose against the euro for a second day today. Gold usually moves in the opposite direction to the dollar. The Federal Open Market Committee plans to issue a policy statement at around 2:15 p.m. today in Washington. The morning “fixing” of gold, the price used by some mining companies to sell production, rose to $1,164.25 an ounce from $1,149.50 at yesterday’s afternoon fixing. Platinum, Palladium Fall Prices of gold may be supported as investors switch focus from economic recovery to inflation, Smith said. In a study going back to 1983, Standard Chartered found that gold rallied an average 18 percent in the months before the Fed’s first rate increase after a downturn. Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, expanded for a second day to a record 1,146.83 metric tons yesterday, according to figures on the company’s Web site. Gold assets in exchange-traded products of ETF Securities Ltd. in London and Zurich rose 0.4 percent yesterday to 7.68 million ounces, according to information on the company’s Web site. All of the gain was in London, according to the company. Silver fell 1.1 percent to $17.969 an ounce, platinum dropped 0.6 percent to $1,708.10 an ounce and palladium declined 1.3 percent to $541.70 an ounce. To contact the reporters on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net.

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