Gold extends losses on U.S. construction data, upcoming FOMC protocols

Gold retained its losses on Wednesday as upbeat U.S. construction data strengthened the U.S. dollar, laying pressure on dollar-priced commodities. Market players continued to focus at the minutes of FOMCs July meeting, looking for signs that would indicate the Federal Reserve might start tapering its Quantitative Easing program in as early as September.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery fell to $1 363.40 per troy ounce at 14:15 GMT, marking a 0.66% decline. The precious metal remained pressured throughout the day and ranged between days high and low of $1 373.90 and $1 359.40 per ounce respectively. Futures rose by 0.09% on Tuesday but extended their weekly decline to 0.9% following Wednesday’s losses.

Gold extended losses on Wednesday amid upbeat U.S. construction data, which supported speculations that the Federal Reserve might pare its monetary easing program in September. The National Association of Realtors reported that Existing Home Sales in July rose to 5.39 million, up from 5.08 million units sold in June. Last months reading also surpassed analysts expectations for a surge to 5.15 million homes sold, backing the economists who expect stimulus tapering to begin in September.

The upbeat data boosted the U.S. dollar, allowing it to erase some of its earlier weekly losses. The dollar index, which measures the greenbacks performance against six major counterparts, rose 0.31% on the day and traded at 81.18 at 14:13 GMT. The September contract held in range between days high and low of 81.22 and 80.93 respectively. The U.S. currency gauge fell 0.41% on Tuesday but trimmed its weekly decline to 0.2% following Wednesdays advance.

Gold has shed 18% off its value so far this year amid speculations the Federal Reserve may begin winding down its monetary easing program after capping a 12-year bull run in 2012. An exit from Quantitative Easing would deliver a heavy blow to dollar-priced raw materials as it will strengthen the dollar, thus making commodities more expensive for foreign currency holders and limiting their appeal as an alternative investment. At the same time, gold is mainly used as a hedge against inflation, which tends to arise as central banks ease money supply, therefore stimulus tapering would cripple demand for the precious metal.

According to a Bloomberg survey of economists, 65% of the participants expected that the Federal Reserve will start trimming its $85 billion per month bond purchases after FOMC’s September meeting.

Andrey Kryuchenkov, a commodity strategist in London at VTB Capital, wrote in a report: “It will be harder to sustain physical demand at higher prices with bargain hunting clearly running out of steam. Attention will turn to the FOMC’s July meeting minutes. Any hawkish comments could see small-scale profit taking in gold.”

Elsewhere on the precious metals market, silver, platinum and palladium tracked gold’s downward movement. Silver for September delivery traded at $22.908 per ounce at 14:14 GMT, down 0.71% on the day. Prices held in range between day’s high and low of $23.145 and $22.763 per ounce respectively. Meanwhile, platinum October futures fell by 0.52% to $1 517.50 per ounce. Futures varied between $1 524.75 and $1 507.85 per ounce. Palladium for September delivery stood at $747.70 an ounce, down 0.26% on the day. Futures shifted between day’s high and low of $750.40 and $741.10 per troy ounce respectively.