Gold Swings as Investors Weigh Demand Signs Against Fed Outlook
London (Dec 13) Gold swung between gains and losses in London as investors weighed signs physical demand may rise at lower prices against the outlook for less U.S. stimulus.
The U.S. House passed a federal budget plan yesterday, boosting speculation the measure will support the economy and make it easier for the Federal Reserve to start to reduce stimulus. Volumes for bullion of 99.99 percent purity on the Shanghai Gold Exchange, the benchmark spot contract, rose today to the highest since Nov. 28.
Gold is set for the first annual drop in 13 years as some investors lost faith in the metal as a store of value and on speculation the Fed will pare monetary stimulus as the economy improves. Bullion touched $1,210.61 an ounce on Dec. 6, the lowest since July 5, after data showed U.S. payrolls gained more than forecast in November.
Gold is supported “thanks to some pickup in Chinese demand,” Abhishek Chinchalkar, a research analyst at Mumbai, India-based AnandRathi Commodities Ltd., said today in a report. A budget plan approval gives “the Fed more leeway to begin scaling back its QE program. We expect movement in gold to be quite choppy heading into next week’s FOMC meeting.”
Gold for immediate delivery was little changed at $1,226.14 by 9:41 a.m. in London. Prices rose as much as 0.4 percent and fell as much as 0.2 percent after sliding 2.1 percent yesterday, the most since Dec. 2. Bullion for February delivery was little changed at $1,225.30 on the Comex in New York.
Futures trading volume was 24 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed.
ETP Holdings
Holdings in gold-backed exchange-traded products dropped 7.6 metric tons to 1,813.7 tons yesterday, the lowest since November 2009, data compiled by Bloomberg show. The Fed may begin reducing its $85 billion of monthly bond purchases at its Dec. 17-18 meeting, according to 34 percent of economists in a Dec. 6 Bloomberg survey, up from 17 percent in a Nov. 8 poll.
Silver for immediate delivery was little changed at $19.5015 an ounce in London. Prices dropped 3.9 percent yesterday, the most since Dec. 2 and silver-backed ETP holdings shrank 95.3 tons on Dec. 11, the biggest one-day outflow since June, according to data tracked by Bloomberg.
Palladium rose 0.8 percent to $723.10 an ounce. Platinum added 0.1 percent to $1,365.75 an ounce.
