* Talk of hedge fund liquidation hits markets
* Silver, platinum group metals decline sharply
* Some Fed officials say may have to stop or slow QE before
jobs recovery
By Frank Tang
NEW YORK, Feb 20 (Reuters) - Gold tumbled nearly 3 percent
on Wednesday to its lowest since July after minutes of the
Federal Reserve's meeting last month showed it may have to slow
or stop buying assets before a pick-up in the job market.
The metal's 2.7 percent slide was its biggest one-day drop
since Feb. 29, 2012, when it had plummeted 5 percent as
investors questioned the Fed's commitment over its loose
monetary policy. Silver and platinum group metals also dropped
sharply.
Bullion was already under heavy pressure before the Fed
minutes, because of widespread rumors of a large commodity hedge
fund forced to liquidate its holdings, which triggered a broad
sell-off in other industrial commodities led by crude oil.
Gold selling accelerated after bullion slipped below $1,600
an ounce and completed a bearish technical formation known as a
"death cross", when its 50-day moving average broke below its
200-day moving average.
"People are taking a step back and asking themselves 'Is the
Fed going to stop quantitative easing earlier?'" said Axel Merk,
chief investment officer of Merk Funds which manages $630
million in mutual fund assets.
Spot gold was down 2.8 percent to $1,558.54 an ounce
by 2:54 p.m. EST (1954 GMT), having hit $1,558.24, its lowest
since July 12.
U.S. gold futures for April delivery settled down
$26.20 at $1,578 an ounce, with trading volume about 30 percent
above its 250-day average, preliminary Reuters data showed.
"A number of participants stated that an ongoing evaluation
of the efficacy, costs, and risks of asset purchases might well
lead the (policy-setting) committee to taper or end its
purchases before it judged that a substantial improvement in the
outlook for the labor market had occurred," the Federal Open
Market Committee minutes released on Wednesday said.
The Fed voted last month to maintain its third round of
so-called quantitative easing, or QE3, at a $85 billion monthly
pace, and said it would buy bonds until it saw a substantial
improvement in the outlook for the labor market, which remains
under pressure with the jobless rate at 7.9 percent.
Minutes from the December meeting showed some policymakers
had been mulling a lessening or complete withdrawal of Fed
stimulus.
Silver fell 3.9 percent to $28.28 an ounce, platinum
dropped 2.7 percent to $1,641.49, and palladium
was down 4 percent at $730.72 an ounce.
2:54 PM EST LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold APR 1578.00 -26.20 -1.6 1558.50 1609.20 225,498
US Silver MAR 28.622 -0.800 -2.7 28.255 29.615 88,535
US Plat APR 1647.10 -50.40 -3.0 1636.10 1699.00 20,945
US Pall MAR 736.40 -27.75 -3.6 728.50 766.30 12,294
Gold 1558.54 -45.67 -2.8 1559.55 1609.21
Silver 28.280 -1.140 -3.9 28.320 29.640
Platinum 1641.49 -46.26 -2.7 1639.75 1696.00
Palladium 730.72 -30.50 -4.0 732.52 764.00
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 238,994 190,934 173,016 16.18 1.11
US Silver 123,542 51,535 52,290 23.18 1.53
US Platinum 21,407 14,478 11,126 17.32 -0.11
US Palladium 14,203 5,872 4,796
(Editing by Chizu Nomiyama)
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