Gold Extends Losses As Fed Taper Concerns Linger

Gold futures fell in electronic trade Monday, stretching losses on indications that a reduction in U.S. monetary stimulus is still possible by the end of the year.

December gold  fell $11.40, or 0.9%, to $1,321.90 an ounce in electronic trade.

Prices had been down roughly $14 early Monday but pared losses after an HSBC report showed Chinese manufacturing activity at a six-month high, providing a upbeat development about China, one of the world’s largest consumers of gold.

However, gold still extended losses from Friday, when St. Louis Fed President James Bullard told Bloomberg Television that a small tapering of bond purchases is “possible” at the Fed’s October meeting. Prices on Friday had dropped $36.80, or 2.7%, on the Comex division of the New York Mercantile Exchange.

“This was a close decision here in September, so it’s possible that you get some data that change the complexion of the outlook and make the committee be comfortable with a small taper in October,” he said.

Monetary policy makers last Wednesday delivered a largely unexpected decision to keep buying securities at a pace of $85 million a month because they believed the U.S. economy wasn’t strong enough yet to withstand any policy changes.

Gold on Thursday rallied $61.70, or 4.7%, following the Fed’s announcement, which was considered bullish for the precious metal.

Data from the Commodity Futures Trading Commission released late Friday showed that speculative traders increased their gross shorts ahead of the Fed announcement. A short position is essentially a bet that prices will decline.

Meanwhile, holdings in SPDR Gold Trust  fell to 910.19 tonnes from 912.00 tonnes on Friday which weighed on gold prices, according to an ICICI Bank note Monday.

“Going ahead, markets will closely watch the third reading of the U.S. gross domestic product print, due later this week, for further cues,” wrote the ICICI Bank analysts.

In other metal-futures trade Monday, December silver   lost 39 cents, or 1.8%, to $21.53 an ounce.

December palladium  fell $5.35, or 0.7%, to $716.60 an ounce, and October platinum   lost $2.40, or 0.2%, to $1,430.20 an ounce.

Copper for December delivery   shed 5 cents, or 1.4%, to trade at $3.27 a pound.

Source : Marketwatch