Gold hits lowest in 3 wks, Syria tensions ease
London (Sept 11) Gold was mostly trading sideways in early European hours on Wednesday, with the market holding its breath ahead of the Federal Open Market Committee (FOMC) meeting next week.
Spot gold drifted to its cheapest in three weeks overnight, falling to $1,356.30 before recovering to $1,366.80/1,367.65 per ounce, up $2.30 on the previous close.
"Precious metals are near the lows of recent trading ranges and support levels are therefore being tested, which means the complex is vulnerable," FastMarkets analyst William Adams said. "Our present feeling over tapering is that the Fed will make a token move next week but that is likely to have already been discounted by the market."
The Federal Open Market Committee (FOMC) meets next week, where the unwinding of its third quantitative easing programme (QE3) - worth $85 billion per month - is likely to be the main topic of debate. Accommodative measures from the US central bank are supportive of gold because extra liquidity tends to debase the dollar and create future inflationary risks.
Gold was also pushed back by US President Barack Obama's perceived retreat on plans for an immediate military strike against Bashar al-Assad’s government in Syria after state television said it has agreed to hand over its chemical weapons to international observers.
The regime allegedly used chemical weapons against civilians in civil war that has resulted in more than 100,000 deaths.
Meanwhile, Goldman Sachs forecast that gold's negative run will extend into next year while the US Federal Reserve brings its quantitative easing programme to a close.
The reduction in liquidity may push gold prices lower, the investment bank said, expecting policy makers to start to unwind QE3 at its meeting next week.
“Gold prices will decline into 2014 on the back of an acceleration in US activity and a less accommodative monetary-policy stance,” it said in a note.
The bank still sees gold at $1,300 per ounce over six months but sees it falling to $1,175 over 12 months.
In wider markets, the dollar remained virtually unchanged overnight, with the euro steady at 1.3262.
The other precious metals followed gold modestly higher, with silver climbing five cents to $23.04/23.09 per ounce, although it had been as low as $22.77.
The platinum group metals were both up around one percent on concerns that South Africa’s more militant unions may call a strike over wage demands. Platinum was last up $15 at $1,477/1,487 per ounce and palladium gained $8 to $689/704.
