Gold eases off 6-wk high on physical demand bets; FOMC eyed
New York (Jan 21) Gold futures eased from their six-week high on Tuesday, slashing their gaining streak as traders digested the possible impact of the recent rally on the physical demand. Moreover, investors seemed to start taking a more cautious approach ahead of next week's US Federal Reserve (Fed) meeting.
Gold deliveries for February fell 0.52% to $1,247.80 an ounce on New York's Comex as of 9:34am GMT. Meanwhile, silver futures shed 1.13% to $20.075 an ounce.
The yellow metal reached $1,262.00 an ounce on Monday, the highest price since December 11, while the previous session's contracts will be booked with Tuesday’s trades for settlement purposes as the US markets were closed for Martin Luther King, Jr Day.
Physical demand in China - most probably the world's largest gold consumer after India - has supported the metal and lifted it from its half-year low of $1,181.40 on December 31, when it capped the first annual decline since 2000 and at the same time, the steepest annual decline since 1981.
FOMC eyed
The Fed's Federal Open Market Committee (FOMC) meets on January 28-29. In its last policy meeting in December, the US central bank decided to cut its historic bond-buying stimulus by $10 billion to $75 billion a month.
A reduction in the program to $65 billion a month from the current $75 billion could be announced at the meeting, some analysts suggested, as a lackluster December non-farm payrolls failed to hurt the central bank's expectations for solid US economic growth this year.
"We’re likely to continue on a path of gradual, measured reductions in the pace of purchases, assuming the economy tracks as we expect it to,” San Francisco Fed President John Williams said in an interview with the Wall Street Journal early in the month.
The majority of analysts believe that policymakers will switch off the stimulus program completely by December this year - a move that will most likely be negative for gold.
The US dollar index, indicating the relative strength of the greenback versus a basket of six of its major peers, inched down 0.06% to 81.176 points at the time of writing, remaining in the vicinity of a one-month high prior to the FOMC meeting.
