Gold Declines as Fed expected to Press On With Tapering

Gold fell, extending two weeks of losses, as investors weighed the prospects of reduced stimulus in the U.S. against signs of increased demand.

Gold for immediate delivery dropped as much as 0.5 percent to $1,385.50 an ounce, and traded at $1,387.99 at 12:39 p.m. in Singapore. The price advanced 1.8 percent on Sept. 6, the most since Aug. 22, after data showed U.S. employers added fewer jobs than estimated in August, paring the week’s loss to 0.2 percent.

Gold has lost 17 percent this year amid expectations the Federal Reserve will curb quantitative easing as early as this month. Fed officials will still reduce the $85 billion monthly bond-buying program by $10 billion at the Sept. 17-18 meeting, according to the median of 34 economists in a Bloomberg survey after the jobs data was released. The volume for Shanghai’s benchmark spot contract climbed to a two-week high, while assets in the biggest exchange-traded product held steady.

“While the jobs report trailed expectations, that hasn’t altered the view that the Fed will most likely begin the withdrawal of QE next week,” said Sun Yonggang, a Shanghai-based macroeconomic strategist at Everbright Futures Co. “Demand in Asia has been quite good. Both physical and investment demand have kept prices well bid.”

In China, volumes for spot gold of 99.99 percent purity climbed to 12,553 kilograms on Sept. 6, the highest since Aug. 22, Shanghai Gold Exchange data show. Holdings in the SPDR Gold Trust, the biggest exchange-traded product backed by bullion, were unchanged for a third day on Sept. 6 at 919.23 metric tons.

Syria Turmoil

Gold capped the first back-to-back monthly gain in a year in August as turmoil in the Middle East fanned haven demand. U.S. Secretary of State John Kerry said yesterday that Saudi Arabia backs a strike against Syria, and that more nations will announce support for a possible U.S.-led attack in retaliation for Syria’s alleged use of chemical weapons last month.

Gold for December delivery traded at $1,387.80 an ounce on the Comex in New York from $1,386.50 on Sept. 6, when it rose 1 percent. Money managers’ net-long gold positions rose 3.6 percent to 101,396 futures and options in the week ended Sept. 3, U.S. Commodity Futures Trading Commission data show.

Silver for immediate delivery retreated 0.6 percent to $23.718, and platinum lost 0.2 percent to $1,493.40 an ounce. Palladium was little changed at $697.54 an ounce.

(Source: Bloomberg)