Gold Trades Near Four-Month Low As Fed Minutes, Inflation Data Weigh

Gold inched up during the European trading hours on Thursday, hovering near four-month lows after setting its biggest drop in seven weeks in the previous session as minutes from the Federal Reserve`s most recent policy meeting showed some officials expect a wind-down of the central bank`s bond buying in the coming months.

The yellow metal was weighed by the latest round of mixed U.S. economic data and by strength in the dollar.

Gold marked its lowest settlement since mid-July in the previous session, while the dollar hit its highest in nearly a week against a basket of major currencies.

Spot gold edged down 1.08 percent or 13.60 points percent to $1,247.26 an ounce but was not too far from a four-month low of $1,240.69 hit on Thursday; when both gold and silver fell about 2.5 percent.

Elsewhere in metals trading, spot silver was 1.03 percent lower at $19.91 an ounce. The metal dropped to $19.80 yesterday, the lowest since Aug. 8.

Platinum gained 0.4 percent to $1,398.55 an ounce, while Palladium dropped 0.06 percent to $714.20 an ounce.

The release of minutes from the Fed‘s latest policy meeting put further pressure on prices, after it showed that officials saw the central bank could start scaling back its$85 billion in monthly asset purchases at one of the next few meetings, citing the strong economic growth.

Some investors view gold as a hedge against the inflation that followed the Fed’s massive stimulus programs. However, investors have abandoned gold in droves this year as it seemed increasingly likely the Fed would taper its purchases.

Data on Wednesday also supported the idea that Fed tapering could begin soon after data showed U.S. consumer prices last month rose at the slowest pace in four years, the latest evidence that inflation remains low.

The Commerce Department said Wednesday that U.S. retail sales advanced 0.4 percent in October, while sales of previously-owned U.S. homes fell 3.2 percent in October to a 5.12 million annually, the slowest since June.

The U.S. Dollar Index added to its gains after the Fed minutes release, rising sharply higher during the session on Thursday. The USDIX index was up at 81.20 after opening at 81.17.

Meanwhile, holdings in the SPDR Gold Trust, the biggest bullion-backed exchange-traded product, declined for a third day to 860.31 tons on Wednesday, the lowest since February 2009.