Gold falls to 1-month low on QE outlook

Gold plunged more than 1% to a month-low as FOMCs September meeting drew closer and broad expectations call for a reduction of Feds bond purchasing program to be announced. Receding concern over an escalation of the Syrian conflict also pressured the market. Silver, platinum and palladium fell as well.

On the Comex division of the New York Mercantile Exchange, gold for December delivery fell by 1.46% to $1 343.90 per troy ounce at 7:18 GMT. Futures plunged to a 1-month low of $1 343.60 per ounce, while days high stood at $1 366.60. The precious metal slipped 0.1% on Wednesday, a fifth daily decline in six, and extended its weekly retreat to 3.5% after shedding 0.4% in the preceding two five-day periods.

Gold extended losses as the majority of market players expect policy makers to announce a long-awaited reduction of Feds monetary easing program at the upcoming FOMC meeting on September 17-18. According to a Bloomberg survey conducted last Friday, the central bank will trim its monetary stimulus by $10 billion after the meeting.

Meanwhile, Goldman Sachs predicted that gold will extend its 2013′s first annual drop in 13 years into 2014 as the Federal Reserve is expected to bring the Quantitative Easing program to an end by the middle of the year. The group’s analysts also expect that policy makers will announce the begin of QE tapering at the upcoming FOMC meeting on September 17-18, based on the consistent improvement of the economy.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, remained unchanged for a third day at 917.13 tons, data on the web site showed.

The outlook for a peaceful resolution of the Syrian conflict also continued to pressure the gold market by limiting safe haven demand. However, possible news for a fail of diplomacy means and return to outlook for military intervention in Syria would have a strong opposite effect.

U.S. Secretary of State John Kerry is scheduled to meet with his Russian colleague Sergei Lavrov in Geneva to discuss Russia’s plan to put Syria’s chemical arsenal under international control. On Tuesday, Foreign Minister Walid al-Muallem said during a trip to Moscow that Syria accepted Russia’s proposal for granting international control over its chemical weapons as a way for peacefully resolving the conflict with the U.S. and averting military intervention.

President Barack Obama asked Congress in a televised address to the nation later on Tuesday to delay voting for authorization of military action against Syria, seeking a diplomatic resolution to the problem. “It’s too early to tell whether this offer will succeed, and any agreement must verify that the Assad regime keeps its commitments,” Obama said. “The initiative has the potential to remove the threat of chemical weapons without the use of force, particularly because Russia is one of Assad’s strongest allies.”

Wang Xiaoli, chief investment strategist at CITICS Futures Co., said for Bloomberg: “As geopolitical risks fade, the focus is shifting back to QE and the Fed meeting next week, and we expect the market to remain volatile till then. Although an immediate strike is unlikely, the market will continue reacting to headlines on Syria.”

Elsewhere on the precious metals market, silver, platinum and palladium also declined. Silver futures for delivery in December fell by 1.55% to $22.815 per troy ounce at 7:33 GMT. Prices fell to a session low of $22.795 per ounce, the weakest level since August 22, while day’s high stood at $23.247. Platinum October futures slipped 0.51% to $1 466.05 an ounce at 7:33 GMT and ranged between day’s of $1 476.75 and a five-week low of $1 464.90 per ounce. Palladium for December settlement traded at $687.30 per ounce at 7:35 GMT, down 0.56% on the day. Futures held in a days range between $694.20 and $686.60 an ounce.