Gold extends losses after Fed minutes
San Francisco (Nov 19) Gold prices have extended their declines in aftermarket trading after the release of the minutes of the Federal Reserve policy meeting.
Fed officials raised concerns about deteriorating economic conditions in Europe, China and Japan, as well as a stronger greenback, as potential risks to the US economy at the October meeting. The minutes also revealed most of the officials expect inflation to edge lower in the near term, which eases pressure on the central bank to raise interest rates for the first time since the financial crisis.
Despite their concerns about global growth and the US dollar, all but one official voted to end the bond-purchasing program, known as quantitative easing or QE3, that was launched in late 2012 to spur US growth.
"The fact that the Fed showed they're going to end the asset purchases despite some unknowns in the global market is bearish for gold," Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago, said.
Gold had benefited from the Fed's stimulus efforts, which kept interest rates near zero. Gold doesn't pay interest and costs money to store, making it less competitive with Treasury bonds when rates are rising.
The timing of the Fed's rate move has been the focus of much debate in the gold market. While some market participants had hoped the low-rate environment could be extended, most expect to see higher interest rates in the second half of next year.
Gold fell $US5.60, or 0.4 per cent, to $US1,191.50 an ounce in aftermarket electronic trading. Gold trading on the Comex floor closed for the day half an hour before the Fed minutes were released. The most actively traded gold contract, for December delivery, settled down $US3.20, or 0.3 per cent, at $US1,193.90 a troy ounce on the Comex division of the New York Mercantile Exchange.
Mr Haberkorn said the Fed's decision to move ahead on the path to tighter monetary policy is a vote of confidence in the US economic recovery and its ability to shrug pressure from outside factors.
"It shows they see a limited impact from the global slowdown on the US, and it's very bullish for the dollar and bearish gold," he said.
Source: BusinessSpectator
