Gold extends losses as safe haven demand wanes, QE outlook

Gold fell for a second day as tension in the Middle East eased after Russia proposed to assist Syria in relinquishing control of its chemical weaponry, if that would help avoid an imminent U.S.-led intervention in the Syrian civil war. Broad expectations that the Federal Reserve will begin paring its monetary stimulus after FOMCs upcoming meeting on September 17-18 also weighed on the market.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery fell by 0.92% to $1 374.00 per troy ounce. Prices held in range between days high and low of $1 391.20 and $1 373.10 an ounce respectively. The precious metal slipped 0.4% on Monday, extending its current weeks decline to 1.3% after falling 0.4% in the preceding two five-day periods.

The yellow metal edged lower on growing speculation that the Federal Reserve will begin paring its monetary easing program this month. According to a Bloomberg survey of 34 analysts conducted last Friday, the Federal Reserve is expected to announce the reduction of its $85 billion per month bond purchasing program by $10 billion at the Federal Open Market Committees meeting, due on September 17-18. Gold rebounded on Friday after the Department of Labor reported that the U.S. economy created 169 000 jobs last month, which was well below analysts’ forecast for a rise to 180 000. Meanwhile, the U.S. unemployment rate fell to a 4 1/2-year low of 7.3% as more Americans gave up the search for work. The participation rate, the number of Americans who either have a job or are looking for one, fell to 63.2% from 63.4% in July, hitting the lowest value since August 1978.

However, prior upbeat U.S. data, including larger than expected growth in the second quarter, reinforced expectations for QE tapering. Meanwhile, the precious metal was also pressured as receding concern over an imminent U.S.-led attack against the Syrian regime limited safe haven demand.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, fell to 917.13 tons after remaining unchanged for three consecutive days at 919.23 tons.

President Barack Obama said in an interview with NBC News that Russia’s offer to help put Syria’s chemical arsenal under international control was a “potentially positive development” and added that he is not sure of getting congressional support for military action against the Middle Eastern country.

Obama will make his case for U.S. action against Syria in a televised address today at 9:00 PM and is due to speak to lawmakers during the day. The Senate is expected to vote in favor or against the intervention by the end of the week but the passage in the House of Representatives may be tough as Obama hasn’t won the support of many key figures.

Analysts at Hyderabad, India-based Karvy Comtrade Ltd. wrote today in a report: “Due to the fading of geopolitical tensions, gold prices are expected to decline. A tapering of quantitative easing by the Fed is also a concern. Gold prices might remain under pressure.”

Elsewhere on the precious metals markets, silver plunged, while platinum remained fairly unchanged and palladium advanced. Silver for December delivery rose by 1.88% to $23.270 per troy ounce at 9:24 GMT. Prices held in range between days high and low of $23.820 and $23.223 an ounce respectively. Meanwhile, platinum October futures slipped 0.06% to $1 482.15 per troy ounce and held in days range between $1 488.35 and $1 477.95 per ounce. Palladium for December delivery marked a 1.16% gain to $690.90 per ounce and shifted between days high and low of $691.30 and $684.30 per ounce respectively.