Gold retreats from highest in more than a week as silver drops

LONDON: Gold fell from the highest level in more than a week as Chinese markets reopened after a holiday and investors awaited minutes from the Federal Reserve's last meeting for clues on the timing of an interest rate increase.

Gold lost as much as 0.4 per cent to USD 1,140.68 an ounces after jumping to USD 1,153.75 yesterday, the highest since September 25. Silver also slumped 2.9 per cent to USD 15.59 an ounce.

The Fed is scheduled to release the minutes from the Federal Open Market Committee's September 16-17 meeting on Thursday and holds two more policy meetings this year.

Meanwhile, the Shanghai Composite Index of shares climbed 3 per cent, the most since September 16, as trading resumed after a week long break. Gold in Shanghai climbed 1.6 per cent, lagging a 2.7 per cent increase in global prices in the past week when China was closed.

"We're not getting as much support from the return of China as perhaps people would've thought," Victor Thianpiriya, a Singapore-based analyst at Australia & New Zealand Banking Group Ltd., said by phone. "Premiums are lower than when China went on holiday. So we're probably going to see gold head a bit lower in the short term."

Premiums in Shanghai were about $1.60 an ounce compared with a little above $5 through most of September, signaling slightly weaker demand, Thianpiriya said. Bullion of 99.99 per cent purity was at 234.14 yuan a gram ($1,146.53 an ounce) on the Shanghai Gold Exchange.

Expectations of a rate increase this year have been scaled back from 60 per cent a month ago to 39 per cent, according to Fed fund futures data compiled by Bloomberg. The odds rise to 60 per cent for a move in March. Holdings in gold-backed exchange traded funds fell 1.19 metric tons to 1,529.55 tons as of Wednesday, down for a second straight day.

Silver surged 5.4 per cent to 3,425 yuan a kilogram ($16.7717 an ounce) on the Shanghai Gold Exchange, less than an increase of more than 10 per cent in global prices in the past week. Holdings in silver-backed exchange-traded funds fell to the lowest since July 2013 as of Wednesday, data compiled by Bloomberg show. Platinum lost 0.8 per cent and palladium retreated 0.4 per cent.