Gold Drowns Below $1300 On Taper Prospect

TOKYO (Sept 18)   Gold futures tumbled below $1300 an ounce in electronic trades today on prospects that Fed may slow its monthly purchases of $85 billion. The gold rose 70% from December 2008 to June 2011 as the Federal Reserve pumped more than $2 trillion into the financial system by buying debt.

In Asia today, the Japanese stocks moved higher ahead of the much-anticipated outcome of a U.S. Federal Reserve policy meeting. The Nikkei was up 1.4% in Tokyo, responding well to a positive overnight lead from the U.S., while Australia’s S&P ASX 200 was trading around the breakeven mark.

The yen was slightly weaker against the dollar — last at ¥99.21 compared with ¥99.12 late Tuesday in New York. The Australian dollar dropped slightly to $0.9345.

The Fed will wrap up its meeting later Wednesday, with many investors expecting the central bank to start reducing the scale of its bond-buying program — a process that has become known as “tapering.”

Gold for December delivery fell $12.1 to $1,297.3 an ounce in electronic trade, breaking below levels not seen since early August. It fell to as low as $1291.5 earlier today.

The metal jumped nearly $25 an ounce on Monday as the US Dollar slipped after Lawrence Summers withdrew his name from consideration for the job of U.S. Federal Reserve chairman. Summers was widely viewed as more likely to push for a faster end to the central bank’s easy-money policies that have been credited for supporting gold prices and weighing on the dollar.

MCX October bullion may open today’s session near Rs 30000 per 10 grams.