Fed stance, rising dollar hurt gold

Gold declined from a seven-week high in New York as the US central bank damped speculation it would expand stimulus measures and the dollar strengthened, curbing demand for the metal as an alternative investment. The dollar gained versus six major currencies after the Federal Reserve\'s policy meeting on Wednesday and on prospects Greek Prime Minister George Papandreou will face difficulty in getting parliamentary approval next week for a package of budget cuts and asset sales. Gold, down for the first day in eight, climbed within 1.2 per cent of a record set last month. \"People are now expecting no QE3,\" and that\'s one of the factors pressuring gold, said Bernard Sin, the head of currency and metal trading at MKS Finance, a bullion refiner in Geneva. \"The market is reacting a bit to the dollar, and that\'s why we\'re seeing a bit of profit-taking. In the longer term, people will move back into gold.\" Gold for August delivery declined $13.90, or 0.9 per cent, to $1,539.50 an ounce in early trade on the Comex in New York. The metal reached $1,559.30 yesterday, the highest price since May 2. Immediate-delivery gold was 0.6 per cent lower at $1,539.02 in London. Article continues below Bullion fell to $1,541.50 an ounce in the morning \"fixing\" in London, used by some mining companies to sell output, from $1,552.50 at Wednesday\'s afternoon fixing. Policymakers decided to keep the Fed\'s balance sheet at a record to spur the economy after completing $600 billion (Dh2.2 trillion) of bond purchases this month in a second round of quantitative easing, or so-called QE2. The US economy is recovering at a \"moderate pace, though somewhat more slowly\" than the central bank had expected, Fed Chairman Ben S. Bernanke said on Wednesday. European finance chiefs will decide on July 3 whether Greece has met conditions for its next aid payment. Antonis Samaras, leader of the opposition in the Greek parliament, said his party will vote against the government\'s new austerity measures, contrary to European Union calls for unity, the Financial Times reported, citing an interview. Gold is up 8.3 per cent in 2011 after climbing the past 10 years, the longest run of gains in at least nine decades in London. Europe\'s debt crisis helped bullion futures reach a record $1,577.40 on May 2. The metal climbed to an all-time high of £965.84 Wednesday. \"Inflationary expectations and sovereign debt concerns are expected to continue to drive prices,\" John Meyer, an analyst at Fairfax IS in London, said in a report. Marc Faber, publisher of the Gloom, Boom & Doom report, still favours gold and silver and will keep accumulating gold, even though prices of the metals may decline in the next three months, he said. Silver for September delivery fell 1.5 per cent to $36.195 an ounce in New York. Palladium for September delivery declined 2.8 per cent to $749.25 an ounce. Platinum for October delivery was down 1.9 per cent at $1,722.20.