* Some policymakers eye slowing purchases, Fed minutes show
* Cyprus agrees to sell some gold reserves to raise cash
* Goldman cuts price forecast 2nd time in less than 2 mos
* Coming up: U.S. weekly initial jobless claims Thursday
(Updates throughout, adds comments)
By Frank Tang and Carole Vaporean
NEW YORK, April 10 Gold fell 1.5 percent on
Wednesday, its biggest one-day drop in 1-1/2 months, hit by
signs that the U.S. Federal Reserve is inching closer to ending
its monetary stimulus program and by Cyprus's plan to sell its
gold reserves to raise cash.
Panic selling sent gold down to near $1,550 an ounce earlier
in the session after European Commission documents showed Cyprus
plans to sell 400 million euros worth of gold reserves to
finance part of its bailout.
The metal later rebounded off its low as fears of more
official-sector sales subsided. Central banks as a group had
turned net buyers since 2010 as more emerging economies have
added gold to their reserves as a hedge against credit risk.
Gold was also under pressure after minutes from the U.S.
Federal Reserve policy meeting in March suggested it was on
course to end its extraordinary bond buying stimulus by
"The loose monetary policy around the world is clearly
favoring more on equity investments instead of gold," said
Michael Cuggino, portfolio manager of the $15 billion Permanent
Spot gold was down 1.6 percent at $1,559.80 an ounce
by 3:29 p.m. (1929 GMT), its biggest one-day decline since Feb.
U.S. Comex gold futures for June delivery settled
down $27.90 an ounce at $1,558.80 an ounce.
Trading volume was about 20 percent below its 30-day
average, preliminary Reuters data showed.
The March payrolls report, which was released after the FOMC
meeting was held, showed weakness in the U.S. labor market,
prompting some analysts to express doubts about the probability
of the Fed reducing, or ending, its bond-buying program early.
While the S&P 500 rose to a record high on Wednesday and was
up 11.4 percent year to date, gold was down 7 percent in the
CYPRUS SELLS GOLD RESERVES
Gold's losses snowballed after news of the Cypriot plan to
sell its gold, which marked the biggest euro zone bullion sale
in four years.
Although the third Central Bank Gold Agreement (CBGA3)
limits how much gold euro zone central banks can sell to meet
financing needs, investors are now worried other heavily
indebted euro zone members may also start selling.
"The amount mentioned, 10 tonnes, is not large - we've seen
that on average come out of exchange-traded funds this year
every week," Macquarie metals analyst Matthew Turner said.
"But it's the first euro zone country to have said it will
do this for a while," Turner said.
Softer investor confidence in the metal after a fresh
outflow from the world's largest gold exchange-traded fund and a
second cut in Goldman Sachs' gold-price forecast in less than
two months also weighed on prices.
"Funds are starting to think about their gold positions,"
said David Lee, metal trader at Heraeus Precious Metals
Among other precious metals, silver dropped 1 percent
to $27.65 an ounce, after it rallied 2.5 percent on Tuesday for
its biggest one-day rise since mid-February.
Palladium was down 0.8 percent at $718, sharply off
an earlier three-month low, and platinum dropped 1.4
percent to $1,525.74 an ounce.
3:29 PM EST LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold JUN 1558.80 -27.90 -1.8 1556.40 1588.50 160,429
US Silver MAY 27.653 -0.228 -0.8 27.445 27.965 49,558
US Plat JUL 1529.80 -23.30 -1.5 1525.00 1550.60 9,234
US Pall JUN 720.85 -12.15 -1.7 704.00 728.20 7,230
Gold 1559.80 -24.90 -1.6 1557.48 1588.30
Silver 27.650 -0.280 -1.0 27.540 28.010
Platinum 1525.74 -21.26 -1.4 1527.00 1547.00
Palladium 718.00 -5.50 -0.8 708.50 726.33
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 169,268 190,777 172,805 13.69 -0.25
US Silver 62,528 48,066 52,296 20.16 0.12
US Platinum 9,382 15,473 11,853 15.46 1.19
US Palladium 7,325 5,363 5,229
(Additional reporting by Clara Denina in London; Editing by
William Hardy, Kenneth Barry and Peter Galloway)