Gold eased on Wednesday ahead of a US Federal Reserve policy decision later in the day, while a record outflow from the largest exchange-traded bullion fund kept prices near Tuesday's three-month low. The SPDR Gold Trust, the world's biggest gold-backed ETF had its largest one-day outflow on record on Tuesday, reflecting a decline in investor interest.
Barclays Capital said outflows from a range of gold ETFs had brought overall holdings to their lowest in five months. Spot gold was bid at $1,328.20 an ounce at 1505 GMT, against $1,332.75 late in New York on Tuesday. US gold futures for February delivery fell $5.00 to $1,327.50 an ounce. When the Federal Reserve releases its decision on US monetary policy, investors are not expecting the central bank to unveil any change in the benchmark interest rate, but they will seek confirmation from the bank that its focus remains on supporting growth.
"Gold hasn't adjusted to a world in which interest rate rises are conceivable particularly well, and some investors seem to think enough is enough," said Mitsubishi analyst Matthew Turner. This echoes the views of ETF Securities head of research Nick Brooks, who told a journalists' conference call on Wednesday that the ongoing fiscal problems of developed economies, coupled with rising inflation around the globe, would likely feed demand for gold.
"Ultimately, the demand for gold will remain firm and will come back but we're going through a period where there is a lot of profit-taking coming through," he said. Gold has fallen for five days in a row now, bringing the losses for January to more than 6 percent, which would be its worst monthly performance since December 2009. Traders have reported some consumer demand in gold since the price hit its lowest since late October, although this has been modest so far.
Spot platinum was bid at $1,787.24 an ounce against $1,784.50, while palladium was at $787.97 against $778.72. Both are expected to rise this year and next as their underlying fundamentals tighten. "On the supply side, palladium mine production has been relatively subdued," said Bank of America Merrill Lynch analyst Michael Widmer in a weekly report.
"Deliveries from Russian stockpisles have also subsided. This is significant because the nation's de-stocking often switched a structural deficit into an oversupplied market during the past few years." In the medium term, platinum may be set to outshine gold, with the white metal's bull trend conditions remaining intact, analysts said. Silver was bid at $26.77 an ounce against $26.84.
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