Gold Falls Back from 6-Week High; Fed Fears Grip Market

Gold fell one percent on Tuesday, dragged down by firmer equities and a stronger dollar after renewed talk that the U.S. Federal Reserve may announce a further cut in its bond-buying program at its meeting next week.

The Fed’s Federal Open Market Committee (FOMC) meets on Jan. 28-29. In its last policy meeting in December, the U.S. central bank decided to cut its monthly bond purchases by $10 billion to $75 billion. A report in the Wall Street Journal said the central bank was on track to pare the program for the second time in six weeks by another $10 billion a month to $65 billion.

Quantitative easing measures have been crucial to gold’s gains during the credit crunch years, as central bank liquidity and a low interest rate environment encouraged investors to put money into non-interest-bearing assets.

The dollar was up 0.2 percent versus a basket of other currencies, while European shares hit fresh 5-1/2 year highs, tracking Asian shares higher.

Gold purchases in China, the world’s biggest buyer of the metal, have slowed from last week’s levels as gold prices have gained for four straight weeks. Premiums for 99.99 percent purity gold on the Shanghai Gold Exchange fell to about $13 from Monday’s $14, though volumes were higher.

Spot gold was down 1 percent to $1,240 an ounce, not far from the six-week peak of $1,259.85 it touched on Monday.

Platinum was at $1,438, down more than 1 percent after sharp gains in the previous session that took it to $1,469.50 – its highest since October 31.

Source: Reuters