Gold off intraday highs after Bullard's comments
New York (Nov 4) Gold prices eased from previous highs on Monday but traded still slightly elevated as commodity investors await more incentives in the form of anticipated economic data both from the US and the euro zone later in the week.
Gold futures for December delivery inched higher earlier in the session, supported after St Louis Federal Reserve President James Bullard said the central bank does not have to "hurry" to reduce its monthly bond-purchasing program. Later on, the precious metal left its intraday peak of $1,321.67.
Gold was up 0.10% at $1,314.60 per ounce at the time of writing, while silver declined 0.82% to $21.66 per ounce.
Markets anticipate the release of key US economic data later in the week to help assess the timing for a reduction in the Fed’s bond-purchasing program. Most focus is on preliminary data on US third-quarter economic growth on Thursday, while October’s highly-anticipated non-farm payrolls report is scheduled for Friday.
From the euro zone economic front, investors will look to the European Central Bank (ECB) meeting, where the central bank is expected to loosen its policy in the near term. The meeting is scheduled for Thursday.
Uncertainty over QE continues
Gold futures closed last week almost 3% lower, after the Federal Reserve's (Fed) less dovish policy outlook boosted the US dollar to two-week highs. Gold prices are inversely correlated to the greenback. Ahead of the Fed decision, gold rose to $1,361.32 an ounce, its highest since September 20.
The probability that the Fed will trim its stimulus in January increased to 45%, from 25% before last Wednesday's decision to keep the asset purchases at current pace, Citigroup estimated, suggesting that the 'easy money' regime, which has until now nourished global commodities, may finish soon.
Uncertainty over the tapering timing continues after Bullard said on Monday that the central bank does not need to rush to scale back the volume of its monthly asset purchases because inflation is low. His comments followed the speech of Dallas Fed President Richard Fisher who said that the central bank should scale back its stimulus measures as soon as possible.
Bullard, who is a voting member of the Fed's policy-making committee this year, also said that there had been substantial progress on the labor market.
"The Fed may not really believe in December, but it's more about managing expectations and preventing market complacency in the QE3 easy money policy ad infinitum (or for a good while longer at least) creating a dangerous bubble which could burst and do more damage and require more help to repair. We don't want to go their again. So sorry guys, the US data-watching remains in force," Mike van Dulken, head of research at Accendo Markets, wrote in a note to clients.
