Gold declined in New York on speculation further stimulus measures by the Federal Reserve will cut demand for the metal as a protection of wealth. The International Monetary Fund yesterday cut its forecast for global growth and predicted “severe” repercussions if Europe fails to contain its debt crisis. The Fed may say it will replace short-term Treasuries in its portfolio with longer-term bonds today after a two-day meeting, according to a Bloomberg survey. Gold futures set a record $1,923.70 an ounce on Sept. 6. “Over the short-term this might prompt some relief in riskier markets, possibly to the detriment of precious metals,” Marc Ground, an analyst at Standard Bank Plc, wrote in a report, referring to possible Fed measures. “We feel that this relief would be short-lived as participants once again return their focus to the significant problems in the euro zone.” Gold for December delivery fell $9.10, or 0.5 percent, to $1,800 an ounce by 8:07 a.m. on the Comex in New York. Immediate-delivery gold was down 0.4 percent at $1,796.82 in London. 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 27 percent this year, outperforming global stocks, commodities and Treasuries. Europe Talks Greek Finance Minister Evangelos Venizelos made “good progress” in a second round of talks with the European Union and IMF aimed at staving off default, the EU said yesterday. Prime Minister George Papandreou’s government is trying to show it can reach budget targets required for the next 8 billion euro ($11 billion) payment from a bailout engineered in 2010. The Fed will decide to replace short-term Treasuries in its $1.65 trillion portfolio with long-term bonds, according to economists surveyed by Bloomberg. The move, known as “Operation Twist” for its goal to bend the yield curve, will probably fail to reduce the 9.1 percent unemployment rate, 61 percent of the economists said. Bank of England policy makers said it was “increasingly probable” that they may need to buy more bonds to bolster a faltering recovery, after holding off adding stimulus this month in a decision that was “finely balanced.” “At least until the end of the year, the problems in Europe and the U.S. aren’t going to go away and that will keep gold supported,” Yang Shandan, senior trader at Cinda Futures Co., said from Zhejiang, China. “We don’t rule out a test on the highs once the next wave of bad news hits.” Gold exchange-traded-product holdings fell 1.2 metric tons to 2,198.3 tons yesterday, data compiled by Bloomberg show. Assets reached a record 2,260.5 tons on Aug. 8. Silver for December delivery fell 0.3 percent to $40.005 an ounce. Platinum for October delivery was little changed at $1,781.70 an ounce. Palladium for December delivery declined 0.2 percent to $716.25 an ounce. To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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