Gold Futures Dip As Fed Tapering Questions Linger

Prices for gold futures moved lower Tuesday, a cautious direction for the market as investors faced the possibility that the U.S. Federal Reserve will decide to slow the pace of its stimulus efforts.

Gold for August delivery  fell $1.10, or 0.1%, to $1,382 an ounce in electronic trade, ahead of the start later Tuesday of the Fed’s two-day monetary-policy meeting. Gold futures also fell on Monday, by $4.50, or 0.3%, on the New York Mercantile Exchange.

Investors are closely watching for any comments by the Fed about the future of its program of purchasing $85 billion a month in bonds, which is intended to stoke economic growth.

“Any signals of a premature end to ‘QE3’ could weigh on the gold price,” said commodity analysts at Commerzbank to clients on Monday, referring to the Fed’s third round of quantitative easing.

Gold prices in recent years have been buoyed by the Fed’s aggressive monetary-stimulus policies.

After the close of floor trading of gold Monday, a report from the Financial Times said Federal Reserve Chairman Ben Bernanke is likely to signal the central bank is preparing to reduce bond purchases. Bernanke is due to hold a news conference on Wednesday after the conclusion of the Fed meeting.

While most analysts don’t expect the Fed to make a Wednesday announcement about tapering asset purchases, speculation in the markets about possible tapering began to heat up when some Fed officials last month started to voice support for reducing asset purchases.

Last week, a report in The Wall Street Journal indicated Bernanke will reassure investors that an eventual tapering of the Fed’s bond-buying program won’t be accompanied by any immediate hike in interest rates.

Elsewhere in the metals complex Tuesday, July silver  edged up 1 cent to $21.77 an ounce. Copper for July delivery  lost 1 cent, or 0.3%, to $3.19 a pound.

September palladium   slumped $6.10, or 0.9%, to $711.75 an ounce, and July platinum  fell $4.20, or 0.3%, to $1,430.60 an ounce.

Source : Marketwatch