Gold swung between gains and losses on Tuesday ahead of the upcoming Federal Open Market Committee meeting amid broad expectations that the Federal Reserve will begin trimming its bond purchasing program. Receding Syria tension also pressured the market. Silver, platinum and palladium slightly advanced.
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery rose by 0.14% to $1 319.70 per troy ounce by 8:05 GMT. Prices ranged between days high of $1 321.40 and low at $1 306.40, near yesterdays 5-week low. The precious metal fell by 1% on Monday but trimmed its weekly decline following Tuesdays minor gain.
Gold has fallen 22% so far this year and is set for its first annual decline in 13 years as investors lost faith in the metal as a safe haven for wealth preservation and as investors expected the Federal Reserve to begin decelerating its monetary easing program by the end of the year. The metal managed to partially recover and hit a three-and-a-half month high on August 28 as what was seen as an imminent U.S.-led attack against the Syrian regime stoked safe haven demand. However, fading fears curbed demand as the U.S. and Russia struck an agreement to put Syrias chemical arsenal under international control and avert military action.
Gold is expected to remain very volatile before the outcome of FOMCs meeting on September 17-18 and Fed Chairman Ben Bernankes statement after the end of the summit, Goldman Sachs predicted.
Damien Courvalin and Jeffrey Currie, Goldman Sachs Group Inc. analysts, said in a report yesterday: “Our U.S. economists’ expectations for a ‘dovish’ taper and gold’s recent decline will likely limit the downside to gold prices heading into the September FOMC. A more hawkish taper than we currently expect would likely precipitate a decline in gold prices.” Goldman forecasts that gold will extend its bearish movement into 2014 and prices are expected to reach $1 050 per troy ounce by the end of the year amid expectations for accelerating U.S. growth and less need for an accommodative monetary policy.
According to a Bloomberg survey conducted on September 6, the central bank will reduce its monthly purchases of Treasuries to $35 billion from $45 billion and keep mortgage-bond buying unchanged at $40 billion.
Meanwhile, Credit Suisse analysts expected a $20 billion reduction. “A series of recent economic data improvements points in this direction and the weaker-than-expected August labour market report is unlikely to keep the Fed from proceeding with slowly winding down its asset purchases,” the investment bank said.
Gold drew some support on Monday as Lawrence Summers, Treasury secretary under President Bill Clinton and former top aide to President Barack Obama, withdrew from consideration to succeed current Federal Reserve Chairman Ben Bernanke. This boosted speculation that the end of the program might be deferred as Summers was expected to tighten Fed policy more than his potential opponent Fed Vice Chairman Janet Yellen.
Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, remained unchanged at 911.12 tons yesterday, data on the web site showed.
Elsewhere on the precious metals market, silver, platinum and palladium advanced on the day. Silver for December delivery rose by 0.14% to $22.040 per ounce at 8:03 GMT. Prices ranged between days high and low of $22.127 and $21.758 an ounce respectively. Platinum October futures gained 0.30% to $1 445.55 per ounce and held in days range between $1 446.30 and $1 434.15. Meanwhile, palladium for December delivery traded at $708.50 per ounce, up 0.35% on the day. Futures shifted between days high and low at $710.40 and $704.00 an ounce respectively.