Gold dropped to a seven-week low in New York after the Federal Reserve avoided more stimulus measures and as a stronger dollar curbed demand for the metal as an alternative investment. Gold slid as much as 2.6 percent yesterday after the Federal Reserve said the U.S. economy is maintaining its expansion and refrained from taking new action to bolster the economy. The dollar climbed to an 11-month high versus the euro as Italian borrowing costs increased at a debt auction. Gold holdings in exchange-traded products are at an all-time high. Gold fell after the Fed “statement failed to hint at further quantitative easing despite acknowledging slowing global growth,� and as the dollar climbed, Suki Cooper, an analyst at Barclays Capital in New York, wrote today in a report. This week’s drop “reinvigorated physical interest in India and China, however volumes were still relatively light.� Bullion for February delivery dropped as much as 2.3 percent to $1,625.30 an ounce, the lowest price since Oct. 21, and was at $1,632.70 by 8:02 a.m. on the Comex in New York. Immediate-delivery gold was down 0.1 percent at $1,630.40 in London. Bullion is up 15 percent this year and set for an 11th straight annual gain as investors seek to diversify away from equities and some currencies. Dennis Gartman, an economist who predicted the slump in commodities in 2008, yesterday said the metal may decline to $1,475, extending the drop from the record $1,923.70 set in September to more than 20 percent, the common definition of a bear market. Moving Averages Gold’s drop below its 100- and 50-day moving averages since last week took the metal’s 14-day relative-strength index to 33.9 today, near a level of 30 that indicates to some analysts who study technical charts that a climb in prices may be imminent. Gold has traded above its 200-day moving average, now at about $1,614, since the beginning of 2009. Italy sold 3 billion euros of five-year bonds, the maximum target for the auction, and borrowing costs rose to the highest since 1997 as Parliament prepared to approve a 30 billion-euro ($39 billion) emergency budget plan. The Fed yesterday said the U.S. economy continues to expand even as the global economy slows. “If you’re a gold investor now, you’re torn between two worlds: a recovering U.S. market and Europe falling to pieces,� Tom Price, an analyst at UBS AG, said from Sydney. Investors are “trying to weigh out which one actually dominates the gold price, and for at least the next week, the gold price is going to struggle because of the improving U.S. market outlook.� Assets Jump Gold holdings in exchange-traded products rose 0.2 metric ton to an all-time high of 2,360.7 tons yesterday, according to data compiled by Bloomberg. Assets jumped 84.8 tons last month, the most since July. Silver for March delivery dropped as much as 5 percent to $29.705 an ounce, the lowest price since Oct. 5, and was last at $30.135. Palladium for March slid 5.1 percent to $630.25 an ounce. Platinum for January delivery was 1.9 percent lower at $1,463.80 an ounce after touching a two-month low of $1,454.80. 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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