Gold is set to decline for a second day in London as investors await the outcome of the Federal Reserve’s monetary-policy meeting.

The central bank decides whether to add further stimulus when it concludes a two-day meeting today. The Fed will expand Operation Twist beyond $400 billion to spur growth and buy protection against a deeper crisis in Europe, according to a Bloomberg News survey of economists. Euro-area leaders at the Group of 20 summit in Mexico yesterday pledged to take “all necessary policy measures” to defend the currency union.

“Some nervous low-volume trading is to be expected ahead of the Federal Open Market Committee’s statement,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a report. “Unless the dollar tumbles, there is little chance for a sustained rebound in gold.”

Bullion for immediate delivery fell 0.1 percent to $1,617.02 an ounce by 9:16 a.m. in London. August-delivery futures were 0.4 percent lower at $1,617.50 on the Comex in New York.

The metal is up 3.4 percent this year after 11 consecutive annual increases. Gold rose about 70 percent as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing ended in June 2011. Holdings in the SPDR Gold Trust, the biggest bullion-backed exchange-traded product, were unchanged at a four-week high of 1,281.6 metric tons yesterday, the company’s website showed.

“Investors are exercising caution in case the Fed disappoints,” said Huang Fulong, an analyst at CITICS Futures Co., a unit of China’s biggest listed brokerage. “Gold above $1,600 has easing priced in and may sell off hard if some form of stimulus isn’t taken.”

Central banks may buy more bullion this year than the purchases of about 456 tons in 2011 as countries diversify their reserves, Ashish Bhatia, the manager of government affairs at the World Gold Council, said yesterday in an interview in New York.

Silver for immediate delivery fell 0.2 percent to $28.3725 an ounce. Palladium was 0.6 percent lower at $626.09 an ounce. Platinum was little changed at $1,482.88 an ounce.

http://www.bloomberg.com/news/2012-06-20/gold-set-to-rebound-on-expectation-fed-will-stimulate-economy.html