NEW YORK/LONDON: Gold fell 2 percent on Tuesday for its biggest one-day drop in a month, tumbling suddenly after the Federal Reserve released minutes of its March meeting, suggesting to investors that policy makers were growing less eager to launch additional monetary stimulus measures.
Bullion was already lower before the Fed released minutes of its most recent policy meeting, which suggested that officials of the US central bank were not ready to start a third round of government bond buying, or quantitative easing, known as QE3.
"The Fed has distanced itself from QE3. It's in line with what Bernanke said in February, but nonetheless it's enough to reduce the near-term bullish momentum," said James Steel, chief commodity analyst at HSBC.
Gold has now fallen below its levels in late January when the Fed said it would keep interest rates near zero until at least late 2014 and investors believed more easing was likely.
Spot gold was down 2 percent at $1,643.60 an ounce by 3:24 p.m. EST (1924 GMT). It had gained as much as 2 percent in the two previous sessions.
Prior to the Fed minutes, US gold futures for June delivery settled down $7.70 an ounce at $1,672.
Trading volume rose after the Fed minutes but still was below normal for a third straight day.
George Nickas, a precious metals broker at commodities firm INTL FCStone, said increased trading activity would be unlikely until gold can break out of a recent trading range between $1,630 and $1,700 an ounce.
In earlier trade, funds appeared uninterested in the gold trade as US economic data for factory goods orders and auto sales pointed to a strengthening economic outlook.
In the minutes of the Fed's March meeting, policymakers noted signs of slightly stronger economic growth but remained cautious about a broad pick up in US activity, focusing on a still-elevated jobless rate.
"It's fair to say the Fed remains conscious about the recovery, so perhaps this sell-off is overdone," said HSBC's Steel.
However, the minutes suggest the appetite for another dose of quantitative easing, so-called QE3, has waned significantly.
QE HOPES, INDIA STRIKE
Ultra-loose monetary policy helped send gold to record highs in 2011. But gold's climb stalled as a recent raft of firmer-than-expected US economic data curbed expectations for a third round of quantitative easing.
Prices have fallen around 8 percent since expectations for more Fed asset-buying pushed gold to $1,790 at the end of February, its highest price since November.
"The gold market has recently been very sensitive to Fed statements, so it is likely to react to the news," BNP Paribas analyst Anne-Laure Tremblay said. "The apparent absence of physical demand, notably with the strike of Indian jewelers, has been weighing on prices."
Gold demand from India, the world's biggest buyer of bullion, remained sluggish as the prolonged strike by jewelers to protest excise taxes levied in the budget continued into a third week.
Surging car sales, however, kept industrial precious metals such as platinum, palladium and silver from falling further.
US auto sales rose more than 15 percent in March as rising consumer confidence quickened the pace of a sluggish recovery.
Spot silver was down 1.2 percent at $32.58 an ounce, spot platinum eased 0.4 percent at $1,638.24 an ounce, and spot palladium inched down 0.2 percent at $648.85 an ounce.
VOL US Gold JUN 1672.00 -7.70 -0.5 1640.20 1682.70 140,552 US Silver MAY 33?Reuters
Comments
Comments are closed.