By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) — Gold futures broke through a key technical level on Thursday after a Fed official said the central bank could start tapering off its asset buys by this summer. A day prior, the metal dropped to its lowest settlement level since June.
Central bank meetings are on tap out of Europe, while a massive easing program by the Bank of Japan was also being absorbed by investors.
Gold for June delivery GCM3 -0.47% fell $9.30, or 0.6%, to $1,544.30 an ounce. On Wednesday, gold sank $22.40, or 1.4%, to settle at $1,553.50 an ounce on the Comex division of the New York Mercantile Exchange, the lowest settlement for a most-active contract since June 28, according to FactSet data.
Wednesday’s tumble came amid selling in the largest gold-backed exchange-traded fund GLD -1.12% , which has pressured gold prices, said analysts.
On Thursday, it was all about central banks. Gold dropped below the key $1,550 level after John Williams, president of the Federal Reserve Bank of San Francisco, said Wednesday that the central bank could start tapering its $85 billion-a-month asset-buying program by the summer.
“Assuming my economic forecast holds true, I expect we will meet the test for substantial improvement in the outlook for the labor market by this summer. If that happens we could start tapering our purchases then,” Williams said in a speech to a business group in Los Angeles.
U.S. stock futures were not dented, in fact they were rising, supported by a massive easing program announced by the Bank of Japan. The dollar rose against the Japanese yen, while stocks in Japan rallied on that easing announcement.
Weakness in the dollar usually provides support for dollar-denominated commodities such as gold as it makes them cheaper for holders of other currencies to buy. If the dollar is firmer, the opposite often holds true.
The ICE dollar index DXY +0.63% , which measures the U.S. currency against a basket of six major rivals, traded at 83.136, up from 82.712 seen in late Wednesday in North America.
Markets are now waiting on more central bank meetings out of Europe. The Bank of England is due to deliver a decision on its monetary policy meeting at 7 a.m. Eastern time and the European Central Bank will deliver its own decision at 7:45 a.m. Eastern time. A news conference by ECB President Mario Draghi takes place at 8:30 a.m. Eastern.
Analysts at Credit Suisse said in a note that published on Wednesday that they have slashed their 2013 gold forecast to $1,580 from $1,740 an ounce. For 2014, they’ve cut that forecast to $1,500 from $1,750 an ounce.
In the wider metals complex, silver for May delivery SIK3 +0.03% shed 6 cents to $26.73 an ounce, while copper for the same month HGK3 -0.30% lost a penny to $3.32 a pound.
July platinum PLN3 -1.08% shaved off $21.40 to $1,520.50 an ounce. Palladium for June PAM3 -0.82% gave up $7.90 to $747.60 an ounce.
Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @bkollmeyer.
