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Gold dropped to a one-week low on Tuesday as mixed U.S. data spurred further speculation of a possible Quantitative Easing scale back after tomorrows Fed meeting or some of the next ones.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery dropped 1.31% on the day, standing at $1 364.85 a troy ounce at 14:18 GMT. The precious metal hit a one-week low earlier at $1 363.15 and the days high stood at $1 385.35 an ounce.

Gold, which is used as a hedging strategy to counter inflationary effects, remained lower after Core CPI, which excludes the more volatile energy and food prices, rose only by 0.2% compared to 0.1% in April and met projections. On an annual basis Core Consumer Price Index also met expectations and remained the same compared to May 2012 at 1.7%. CPI for May was even lower than anticipated and stood at 0.1%, below forecasts for a 0.2% increase.

A separate report showed the Housing Starts indicator was below forecasts of 0.950 million gain, but standing at 0.914 million it outperformed April’s 0.856 million reading. Building Permits stood at 0.974 million, below projections of 0.977 million and below last months revised reading of 1.005 million.

Meanwhile, gold prices were pressured by reduced demand from the worlds biggest importer, India. The country has been trying to reduce its record current account deficit after physical gold demand surged following the massive drop in prices during April. According to Arvind Mayaram, Economic Affairs Secretary, India could implement more measures to curb imports after it increased taxes on inbound gold shipments from 6% to 8% in the beginning of June. According to Kitco Metals Inc., physical demand in North America and Europe has dropped about 80 percent compared with sales in April.

Frank Lesh, a trader at FuturePath Trading in Chicago, said in a telephone interview for Bloomberg: “Everybody is waiting for tomorrow’s statement. There is a complete lack of interest on the physical side,” he referred to Ben Bernankes long anticipated statement on the future of Feds bond purchasing program.

A possible scale back of Fed’s monetary stimulus will deliver a blow to gold prices as investors use commodities as an alternative for wealth preservation, when threatened by inflationary effects. Although inflation in the U.S. is still low, as data showed today, and there is generally more room in the economy for monetary easing, slowing down the Quantitative Easing program will cause investors to go even more bearish.

Elsewhere on the precious metals market, silver, platinum and palladium tracked golds direction and marked daily losses. Silver for July delivery fell 1.19% to trade at $21.498 a troy ounce at 14:37 GMT, ranging between $21.878 and $21.458. Platinum July futures stood at $1 432.05 an ounce, down 0.19% for the day. Palladium for September delivery tumbled 1.65% today and traded at $706 an ounce, ranging between daily high and low at $716.50 and $697.70 respectively

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