Gold Gains From Five-Week Low on Weaker Dollar Before Fed Meets
FRANKFURT (Sept 17) Gold gained from a five-week low in London as a weaker dollar spurred demand for an alternative investment and before the Federal Reserve commences a two-day policy meeting today.
Gold fell to $1,303.43 an ounce yesterday, the lowest since Aug. 8. The dollar was near the lowest in almost three weeks versus the euro as the exit of Lawrence Summers from consideration to be next Fed chairman fueled bets the central bank will be slower to reduce bond purchases. Fed Vice Chairman Janet Yellen is now the leading candidate, a person familiar with the process said.
Gold fell 21 percent this year as some investors lost faith in the metal as a store of value and on speculation the Fed will curb stimulus. Policy makers will probably slow monthly bond purchases to $75 billion from $85 billion, according to a Sept. 6 Bloomberg survey of economists. The meeting may keep prices volatile, according to Goldman Sachs Group Inc., which remains neutral on the metal to the end of the year.
“You have a firmer euro against the dollar,” Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by phone. “The market perceived Summers as being hawkish. It increases the chances for Yellen, and that’s regarded as a continuation of monetary easing. That is of course good for gold.”
Gold for immediate delivery rose 0.5 percent to $1,319.75 by 9:41 a.m. in London. Bullion for December delivery added 0.1 percent to $1,319.30 on the Comex in New York. Futures trading volume was 5 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed.
Price Outlook
“Our U.S. economists’ expectations for a ‘dovish’ taper and gold’s recent decline will likely limit the downside to gold prices,” Goldman analysts Damien Courvalin and Jeffrey Currie said in a report dated yesterday. “A more hawkish taper than we currently expect would likely precipitate a decline in gold prices.”
Gold will resume its drop heading into 2014 on expectations economic data will confirm an acceleration in U.S. growth and require a less accommodative monetary policy, according to Goldman, which maintained its forecast for prices to reach $1,050 at the end of next year.
Holdings in gold-backed exchange-traded products fell 1.1 metric tons yesterday to 1,939.2 tons, the lowest since May 2010, data compiled by Bloomberg shows.
Silver for immediate delivery rose 0.9 percent to $22.003 an ounce in London. Platinum gained 0.7 percent to $1,445.70 an ounce. Palladium added 0.4 percent to $707.08 an ounce.
