Gold falls ahead of Fed minutes; S&P rises

By Frank Tang and Jan Harvey
Reuters
Gold bars are displayed at South Africa's Rand Refinery in Germiston
Gold bars are displayed at South Africa's Rand Refinery in Germiston May 30, 2006. Physical sales of gold from South Africa's Rand Refinery to the biggest consuming nation India have fallen by around a fifth so far this year due to a strong rally in prices, a refinery official said on Tuesday. REUTERS/Siphiwe Sibeko

By Frank Tang and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold fell on Wednesday on gains in U.S. equities and fresh outflows from bullion-backed exchange-traded funds, while traders awaited further cues from the minutes of the U.S. Federal Reserve's latest policy meeting.

Worries over Ukraine, as well as technical momentum after a break above $1,300, had helped lift gold nearly 1 percent on Tuesday, but uncertainty over U.S. monetary policy and weak physical and investment appetite curbed that rally.

The Federal Reserve is due to release minutes from its policy meeting held on March 19, when Fed Chair Janet Yellen said the U.S. central bank will probably end its massive bond-buying program this fall and could start raising interest rates around six months later. [ID:nW1N0L3003]

The precious metal came under pressure with U.S. equities, measured by the S&P 500 index, rising for a second day. [.N]

"Attention is diverted towards the equity markets and metals are currently cruising in the background. It seems all the capital markets are lacking a defined trend at the moment and the precious metals are no different," TD Securities traders said in a note.

Spot gold was down 0.3 percent at $1,304.89 an ounce by 12:40 p.m. EDT (1640 GMT).

U.S. COMEX gold futures for June delivery were down $3.70 an ounce at $1,305.

Bullion prices have pulled back sharply from a six-month high near $1,400 an ounce in mid-March as geopolitical tensions eased after Russia officials said the country had no intention to invade other parts of Ukraine outside of Crimea.

A better tone in the U.S. economy has also weighed heavily on gold's appeal as a hedge.

"We're still struggling with the upside in thin trading amid a lack of physical buying or any significant investor interest," Andrey Kryuchenkov, an analyst at VTB Capital, said.

"Investors will look elsewhere should developed economies continue to recover," he said.

Physical gold funds showed further outflows, with holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, falling 2.7 tonnes to 806.48 tonnes on Tuesday. [GOL/ETF]

That reduced its net inflow for the year to 8 tonnes. The fund has not seen any fresh inflows since March 24.

Among other precious metals, silver was down 1.4 percent at $19.72 an ounce, while platinum was down 0.1 percent at $1,432.10 an ounce and palladium was up 1 percent at $779.72 an ounce.