Gold extends losses on Fed stimulus outlook

Gold extended its Friday losses amid speculations that the Federal Reserve might trim its monetary easing program after a policy maker said last week that a small taper may occur at FOMCs October 29-30 meeting. Silver and palladium advanced, while platinum fell.

On the Comex division of the New York Mercantile Exchange, gold futures for delivery in December fell by 0.39% to $1 327.30 per troy ounce at 7:56 GMT. Prices held in range between days high of $1 331.80 and low at $1 313.60, the lowest since September 18. The precious metal fell 2.9% on Friday and settled the week flat after offsetting Wednesdays 4.7% surge.

Gold continued to trade lower after St. Louis Fed President James Bullard said on Friday that the Federal Reserve could still trim its monetary easing program in October if economic data lay support. “October is a live meeting,” he said for Bloomberg. “I’m not saying it’s going to happen, but the possibility exists.”

Victor Thianpiriya, an analyst at Australia & New Zealand Banking Group Ltd., said for Bloomberg: “Bullard’s comments sparked the latest selloff. Fed tapering is obviously still on the cards; it’s just been pushed down the track a little bit.”

Economic news last week supported Bullards view for tapering. The U.S. Department of Labor reported that the number of people who filed for initial jobless payments last week rose by 15 000 to a seasonally adjusted 309 000. If considered as exact, the data showed a consistent increase in hiring.

Data by the Commerce Department showed that the U.S. current account deficit in the second quarter fell to $98.89 billion, the lowest since 2009. A separate report by the National Association of Realtors said that existing home sales in the U.S. rose to a 6 1/2-year high of 5.48 million in August, indicating persistent recovery in the housing market. The reading was the strongest since February 2007 and defied market analysts’ projections for a drop to 5.25 million from July’s 5.39 million homes sold.

Meanwhile, both Citigroup and Morgan Stanley expect gold prices to continue retreating as the deceleration of Feds monetary stimulus is seen imminent and last Wednesdays postpone will benefit prices only in the short term. Citigroup analysts Ed Morse and Heath Jansen said in a report today that the precious metal may fall to $1 250 per troy ounce by the end of the year and Morgan Stanley expects bullion to average between $1 200 and $1 350 an ounce in the coming year before trending lower.

Peter Richardson and his colleagues at Morgan Stanley wrote in a report: “The postponement is only delaying the inevitable. The longer-term narrative for gold remains in place – waning investor appetite for a risk and inflation hedge, challenged physical demand and a rising U.S. dollar. Our price profile now acknowledges that the annual average peak in the price of gold was achieved in 2012 with minimal prospect for recovery.”

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, fell to 910.19 tons on Friday, data on the web site showed. Holdings rose to 912.00 tons on Thursday after remaining unchanged for three consecutive days at 911.12 tons.

Elsewhere on the precious metals market, silver and palladium posted moderate losses, while platinum slightly advanced. Silver futures for December settlement fell by 0.60% to $21.795 per troy ounce at 7:52 GMT. Prices held in range between days high and low of $21.960 and $21.325 respectively. Platinum for delivery in October traded at $1 433.15 per ounce, up 0.04% on the day, and shifted in days range between $1 437.45 and $1 420.65 an ounce. Palladium December futures slipped 0.30% to $719.50 an ounce and held in range between days high and low of $722.80 and $715.20 per barrel respectively.