MW: Gold futures dip as Fed tapering questions linger
By William L. Watts and Carla Mozee, MarketWatch
NEW YORK (MarketWatch) — Gold futures extended a decline Tuesday as traders focused on the possibility that the U.S. Federal Reserve will signal that it’s ready to slow the flow of monetary stimulus.
Gold for August delivery GCQ3 -1.22% dropped $11.50, or 0.8%, to $1,371.60 an ounce as Fed policy makers prepared to start a two-day monetary-policy meeting. Gold futures also fell on Monday, by $4.50, or 0.3%, on the New York Mercantile Exchange.
Economic data on Tuesday offered a mixed bag for Fed watchers. Housing starts rebounded by a stronger-than-expected 6.8% in May, but consumer price inflation was more subdued than expected, posting a monthly rise of 0.1%.
Investors are closely watching for any comments by the Fed about the future of its program of purchasing $85 billion a month in bonds, which is intended to stoke economic growth. The Fed will conclude its two-day meeting Wednesday and Fed Chairman Ben Bernanke will hold a news conference. See The Tell: Here’s proof that Bernanke’s news conferences impact the market.
But some analysts say there may not be much for the Fed to latch on to just yet.
“Recent data gives little insight into, or guidance on, the Fed’s short-term monetary stance while instead offering rich ground for a policy debate. This is likely to be reflected in minutes from the meeting, while Ben Bernanke’s statement late on Wednesday is hardly likely to turn outright hawkish right away, given subdued [CPI readings]. We expect the Fed chairman to be at ease with his ongoing accommodative stance,” said Andrey Kryuchenkov, metals analyst at VTB Capital.
Gold prices in recent years have been buoyed by the Fed’s aggressive monetary-stimulus policies.
After the close of floor trading of gold Monday, a report from the Financial Times said Bernanke is likely to signal the central bank is preparing to reduce bond purchases. Bernanke is due to hold a news conference on Wednesday after the conclusion of the Fed meeting.
While most analysts don’t expect the Fed to make a Wednesday announcement about tapering asset purchases, speculation in the markets about possible tapering began to heat up when some Fed officials last month started to voice support for reducing asset purchases.
Last week, a report in The Wall Street Journal indicated Bernanke will reassure investors that an eventual tapering of the Fed’s bond-buying program won’t be accompanied by any immediate hike in interest rates.
Elsewhere in the metals complex Tuesday, July silver SIN3 -0.84% fell 4 cents to $21.72an ounce. Copper for July delivery HGN3 -1.72% lost 3 cents, or 1.1%, to $3.16 a pound.
September palladium PAU3 -2.01% slumped $11.95, or 1.7%, to $705.90 an ounce, and July platinum PLN3 -0.54% fell $5.70, or 0.4%, to $1,429.10 an ounce.
William L. Watts is MarketWatch's senior markets writer, based in New York. Follow him on Twitter @wlwatts.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
