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By Bloomberg

Gold fell as investors weighed prospects for higher U.S. interest rates after the biggest monthly gain in three years.

Bullion for immediate delivery dropped as much as 0.4 percent to $1,278.73 an ounce, and traded at $1,279.40 at 3:16 p.m. in Singapore, according to Bloomberg generic pricing. The metal advanced 8.4 percent in January, the biggest gain since January 2012.

Federal Reserve Bank of St. Louis President James Bullard said Jan. 30 that investors are wrong to expect the central bank to postpone an interest-rate increase beyond midyear. The policy makers cited a “solid” expansion of the economy in their Jan. 28 statement. Higher rates cut gold’s allure because the metal generally offers investors returns through price gains.

“The volatility in gold has picked up and we expect it to continue on ebb and flow of U.S. rate hike expectations,” said Zou Lihu, an analyst at Citics Futures Co. in Shenzhen.

Data this week may show employers in the U.S. continued to add workers in January, while manufacturing probably moderated. U.S. construction spending probably climbed in December after falling the previous month, economists said before the Commerce Department report today.

Gold Positions

Gold for April delivery traded little changed at $1,279.40 an ounce on the Comex in New York. The net-long position in futures and options advanced 15 percent to 167,693 in the week ended Jan. 27, according to U.S. Commodity Futures Trading Commission data published three days later. Speculators have increased their net-long position by 80 percent this year.

Silver for immediate delivery fell 0.8 percent to $17.1145 an ounce. Prices rose 9.8 percent in January for the biggest monthly gain since June.

Platinum dropped 0.7 percent to $1,233.25 an ounce after prices climbed for a second month in January. Palladium was little changed at $773.30 an ounce after completing the first consecutive monthly decline in a year.