Gold Swings as It Heads for Best Week Since August on Stimulus
LONDON (Oct 18) Gold swung between gains and losses as it headed for its best weekly advance in two months in London amid speculation the Federal Reserve will delay tapering stimulus. Platinum reached a four-week high.
The Bloomberg U.S. Dollar Index reached the lowest in eight months following a deal by U.S. lawmakers this week to extend funding and debt-limit deadlines into next year and end a government shutdown that started Oct. 1. Chicago Fed President Charles Evans said yesterday the central bank should not begin reducing monthly asset purchases as the data used to gauge the economy’s health stopped during the partial shutdown.
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 slow debt purchases. Policy makers unexpectedly refrained from reducing stimulus at their Sept. 17-18 meeting and Pacific Investment Management Co. and BlackRock Inc. said the central bank will postpone tapering its debt buying.
“What’s happening with the debt deal is postponing all the pain that we’re going to see down the road, and it might hamper the growth momentum,” Dominic Schnider, head of commodities research at UBS AG’s wealth-management unit, said on Bloomberg Television’s “On the Move.” “With the prolonging of the problems in the U.S., tapering’s going to be postponed. Gold is supported but let’s be cautious about calling for a much higher price.”
Gold Price
Gold for immediate delivery lost 0.1 percent to $1,318.69 an ounce by 9:12 a.m. in London. Prices reached $1,328.40, the highest since Oct. 8, gaining as much as 0.6 percent and falling as much as 0.4 percent. It climbed 3.7 percent this week, the most since Aug. 16. Bullion for December delivery fell 0.4 percent to $1,317.90 an ounce on the Comex in New York.
Futures trading volume was 11 percent below average for the past 100 days for this time of day, data compiled by Bloomberg showed.
The stalemate over U.S. fiscal policy that shut the government for 16 days slowed economic growth, President Barack Obama said yesterday. Narayana Kocherlakota, president of the Minneapolis Fed, said policy makers should maintain low interest rates to reduce unemployment even at the risk of temporarily pushing inflation above the Fed’s 2 percent goal.
“With the shutdown and the accompanying uncertainty surrounding it taking a chunk out of gross domestic product, bulls are thinking that Fed tapering will be put off for a bit longer than previously anticipated,” Jim Pogoda, a trading consultant at Gold Bullion International in New York, wrote in an e-mail yesterday.
ETP Holdings
Gold holdings in exchange-traded products dropped 4.6 metric tons to 1,896.3 tons yesterday, the lowest since May 2010, data compiled by Bloomberg show. Gold will probably hold near $1,300 until year-end and then decline to $1,050 at the end of 2014 as an improving U.S. economy prompts less stimulus, Goldman Sachs Group Inc. wrote in a report today.
Silver for immediate delivery added 0.2 percent to $21.911 an ounce in London, after reaching a one-week high of $22.1885 yesterday. The metal is up 2.7 percent this week. Palladium was little changed at $740.50 an ounce, after climbing to $742.30, the highest since Aug. 29. Platinum rose 0.2 percent to $1,440.20 an ounce. It reached $1,445.25, the highest since Sept. 20, and is heading for the first weekly advance in eight.
