BLBG:Gold Swings as Investors Weigh Outlook for Reduced U.S. Stimulus
Gold swung between gains and losses in London as investors weighed the outlook for reduced U.S. stimulus after a Federal Reserve policy maker said tapering in October is possible.
Bullion slid 3 percent on Sept. 20, the most in more than a week. Prices rallied 4.1 percent on Sept. 18 after the U.S. central bank unexpectedly refrained from reducing its $85 billion in monthly asset purchases, saying it wants more evidence of an economic recovery.
Gold fell 21 percent this year as some investors lost faith in the metal as a store of value on optimism economies are strengthening. Holdings in gold-backed funds are at the lowest level in more than three years. The Fed may trim bond buying in October after last week’s “borderline decision” not to taper, Fed Bank of St. Louis President James Bullard said Sept. 20.
Bullard commented “that small tapering of quantitative easing is possible next month and this has refocused the markets on the taper/no taper question,” David Govett, head of precious metals at Marex Spectron Group in London, said today in an e-mail. “I cannot see anyone wanting to aggressively go long of precious metals with the possibility or likelihood of tapering hanging over it in the near future.”
Gold Price
Gold for immediate delivery added 0.1 percent to $1,327.59 an ounce by 9:44 a.m. in London. Prices rose as much as 0.5 percent and fell as much as 0.9 percent. Bullion for December delivery slipped 0.4 percent to $1,327.60 on the Comex in New York. Futures trading volume was 4.5 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg showed.
Bullard’s comments “sparked the latest selloff,” Victor Thianpiriya, an analyst at Australia & New Zealand Banking Group Ltd., said by phone from Singapore today. “Fed tapering is obviously still on the cards; it’s just been pushed down the track a little bit.”
Gold may drop below $1,250 before the end of the year as economic data strengthens and investors expect the Fed to start reducing asset purchases, Citigroup Inc. said in a report today. Morgan Stanley expects bullion to average $1,200 to $1,350 in the coming year before trending lower, it said in a report.
Holdings in gold-backed exchange-traded products fell 2 metric tons on Sept. 20 to 1,933.1 tons, the lowest since May 2010, data compiled by Bloomberg shows.
Silver for immediate delivery advanced 0.1 percent to $21.8058 an ounce in London. Platinum rose 0.2 percent to $1,433.50 an ounce. Palladium increased 0.4 percent to $719.25 an ounce.
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Phoebe Sedgman in Wellington at psedgman2@bloomberg.net
To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net
