Gold down for second day as dollar rises, equities gain

By Frank Tang and Clara Denina

NEW YORK/LONDON (Reuters) - Gold fell for a second session on Wednesday as the dollar rallied after data showed U.S. producer prices rose sharply in December even though there were few signs of sustained price pressures.

The Labor Department said its seasonally adjusted producer price index rose 0.4 percent in December, the biggest rise in six months.

The Federal Reserve's Beige Book report also showed the U.S. economy kept growing at a moderate pace from late November through the end of 2013, with some regions expecting a pick-up in growth.

Analysts said gold's near 3 percent gain year-to-date was supported by speculation that the Federal Reserve may be more cautious in tapering its monetary stimulus after last Friday's disappointing nonfarm payrolls report.

 

"But we suspect that the complex will find it hard to sustain these gains over the course of the next few weeks, especially as the next Fed meeting draws near later this month," said Edward Meir, metals analyst at brokerage INTL FCStone.

The next meeting of the Federal Open Market Committee is on January 28-29.

Spot gold dropped 0.4 percent to $1,240.15 an ounce by 3:37 p.m. EST (2037 GMT).

U.S. COMEX gold futures for February delivery settled down $7.10 at $1,238.30 an ounce, with trading volume about 45 percent below its 250-day average, preliminary Reuters data showed.

Bullion was under pressure as the dollar index gained around 0.5 percent, up for a second day on strong U.S. regional manufacturing and the wholesale price data.

A second day of gains in U.S. equities, led by strong earnings from Bank of America Corp , also reduced gold's safe-haven appeal. The S&P 500 index climbed about 0.5 percent.

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As a gauge of investor sentiment, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, fell 3.56 tonnes to a five-year low of 789.56 tonnes on Tuesday.

In physical-market news, China has granted licences to import gold to ANZ and HSBC , the first two foreign banks, sources told Reuters, as efforts to open the world's biggest physical bullion market gather pace.

Among other precious metals, silver fell 0.3 percent to $20.15 an ounce. Platinum dropped 0.2 percent to $1,423.75 an ounce, while palladium was up 0.8 percent at $739.50 an ounce.

Platium group metals failed to react to news that South Africa's Association of Mineworkers and Construction Union (AMCU) said it would not hesitate to call a strike in the platinum industry over wage negotiations.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by William Hardy and Elaine Hardcastle)