VINACHEM

Gold declined as the dollarstrengthened before data that’s forecast to show the U.S economy is improving, boosting the case for reduced stimulus,and as higher prices damped physical demand. Silver dropped.

Spot gold fell as much as 0.6 percent to $1,386.22 an ounceand was at $1,390 at 2:55 p.m. in Singapore. Prices rose 0.6percent yesterday, extending last week’s 2 percent gain that wasthe most in a month, as International Monetary Fund data showedcentral banks including Russia added gold to reserves in April.

Gold has slumped 17 percent this year, while the dollarrallied 5.2 percent against a six-currency basket on speculationthe Federal Reserve may scale back quantitative-easing measuresthat helped bullion cap a 12-year bull run in 2012. Datascheduled for release today is forecast to show that U.S. consumer confidence improved and regional manufacturing shrankat a slower pace, lifting the Dollar Index 0.2 percent.

“As prospects for the U.S. economy remain positive,expectations are for a withdrawal of QE, supporting the dollarand weighing on gold,” said Feng Liang, an analyst at GFFutures Co. in Guangzhou, a unit of China’s third-biggest listedbrokerage. “The initial wave of physical demand after the bigprice drop has eased and purchases tend to slow down as theprice approaches $1,400.”

The Fed currently buys $85 billion of Treasury and mortgagedebt a month. Last week, Chairman Ben S. Bernanke said thecentral bank may cut the pace of asset purchases if policymakers see indications of sustained growth. Spot gold hasdropped 5.9 percent in May, heading for a second monthly loss.

Record Volume

The volume for the Shanghai Gold Exchange’s benchmark cashcontract shrank to a two-week low of 10,094 kilograms yesterday.It had risen to a record after gold dropped to a two-year low of$1,321.95 on April 16. Cash bullion of 99.99 percent purity fell0.6 percent to 279.24 yuan a gram ($1,418.45 an ounce).

In Hong Kong, consumers were paying premiums of about $3 anounce, compared with $5 to $6 last week, as physical buyingslowed, according to Heraeus Metals Hong Kong Ltd. Indianjewelers were paying premiums of $3 to $3.50 to banks, comparedwith $10 to $12 early this month, said Haresh Soni, chairman ofthe All India Gems & Jewellery Trade Federation.

Bullion for August delivery, the contract with the highestopen interest, traded at $1,389.90 an ounce on the Comex in New York from the close of $1,387.50 on May 24. Yesterday’stransactions, made during a U.S. holiday, will be booked withtoday’s trades for settlement purposes.

Platinum rose 0.2 percent to $1,451.65 an ounce, trimming afourth monthly loss. Holdings in platinum-backed ETPs, up 34percent this year, rose to a record 62.45 tons on May 24,according to data compiled by Bloomberg. Platinum will end theyear at $1,690, according to a Bloomberg survey published May 21.

Cash silver declined 0.7 percent to $22.4805 an ounce,heading for a fourth monthly decline. Palladium fell 0.4 percentto $734.60 an ounce, poised for a monthly advance.