Gold hits four-month low after U.S. Fed signals stimulus withdrawal

By Clara Denina

LONDON (Reuters) - Gold hit a four-month low on Thursday, hurt by speculation the U.S. Federal Reserve might be able to start scaling back its monetary stimulus soon.

In the October 29-30 Fed policy meeting minutes released on Wednesday, officials indicated that they could decide to start reducing the asset purchases at one of their next few meetings provided this was warranted by economic growth.

Many in the markets took that to mean the programme could be trimmed earlier than consensus forecasts, which had been pointing to March.

Spot gold hit its lowest level since July 9 at $1,237.09 an ounce, extending a fall of 2.5 percent seen on Wednesday, when the metal posted its biggest daily loss in seven weeks. It was down 0.3 percent to $1,239/16 an ounce by 1528 GMT.

U.S. gold futures for December delivery fell 1.5 percent to $1,238.90 an ounce.

"There is some re-pricing due to the new expectation regarding the view on tapering especially after the Fed minutes yesterday and today's fairly good economic data," Credit Suisse commodity analyst Karim Cherif said.

U.S. data suggested stronger labour market conditions and subdued inflation pressures.

U.S. weekly jobless claims fell more than expected last week, while U.S. producer prices fell for a second straight month in October.

Recent U.S. economic statistics were generally looking better and a solid jobs report for November would increase the likelihood that the Fed would start to scale back bond buying at its meeting next month, St. Louis Fed President James Bullard said on Wednesday.

Gold has been boosted by the U.S. central bank's quantitative easing measures, hitting an all-time high of $1,920 an ounce in 2011, as increased financial liquidity and a low interest rate environment encouraged investors to put money into non-interest-bearing assets.

But a recovery in the U.S. economy this year has prompted the Fed to consider rolling back its stimulus and bullion has lost about a quarter of its value so far in 2013.

Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 2.70 tonnes to a four-and-a-half-year low of 860.31 tonnes on Wednesday.

Physical demand in Asia picked up due to the lower price levels, but not to a great extent, according to dealers.

Silver rose 0.3 percent at $19.84 an ounce, having touched its lowest since mid-August on Wednesday.

Spot platinum rose 0.3 percent to $1,393.99 an ounce, while spot palladium gained 0.7 percent to $713.75 an ounce.

Switzerland's palladium imports rose to a five-month high in October, data from the Swiss customs office showed, after those from Germany climbed to their highest in 3-1/2 years.

(Editing by Mark Heinrich, Keiron Henderson and David Evans)