MW:Gold and silver futures tumble after Fed minutes
By V. Phani Kumar and William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — Gold got knocked back below $1,650 an ounce on Friday, extending losses in European trade, a day after minutes of the Federal Reserve’s most recent meeting suggested the Fed’s asset purchases may end this year.
Gold futures for delivery in February GCG3 -2.68% tumbled $44.60 an ounce, or 2.7%, to $1,630 an ounce, adding to the $14.20 loss suffered overnight on the Comex division of the New York Mercantile Exchange, pulling back after recent gains.
“Gold had been one of the biggest beneficiaries of the Fed’s easing program as it looked more attractive as an inflation hedge. Being priced in U.S. dollars, gold also appears cheaper when the [dollar] is suppressed,” said Stan Shamu, Melbourne-based market strategist at IG Markets.
The declines followed the minutes of the Fed’s last meeting, which showed that several Fed officials thought the central bank would be able to slow or stop the purchases well before December 2013.
Some members didn’t set a specific time frame for ending the Fed’s asset-purchase program, widely known as quantitative easing. Read full story on the Fed meeting minutes.
The Fed’s quantitative easing is generally recognized as a major source of liquidity that weakens the U.S. dollar and helps support prices of a range of assets, including gold.
“The range of views on the likely timing of completion of asset purchases was apparently sooner than market expectations,” analysts at Barclays wrote to clients.
The ICE dollar index DXY +0.42% , which measures the greenback against a basket of six other major currencies, climbed to 80.764 from 80.477 late in North America, and up from 80.199 before the Fed minutes.
Among other metals, March futures for silver SIH3 -4.49% plunged 4.7% to $29.26 an ounce, while those for palladium PAH3 -2.13% lost 2.2% to $681.50 an ounce.
March copper futures HGH3 -0.97% slid 0.8% to $3.69 a pound.
April platinum futures PLJ3 -2.34% gave up 2.2% to $1,545 an ounce.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau. Follow him on Twitter @MktwKumar.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt. Follow him on Twitter @wlwatts.
