Gold fell more than 1 percent on Tuesday to a near three-week low after the Bank of Japan’s decision not to extend its stimulus programme stoked speculation that the era of ultra-loose global monetary policy is coming to an end.
Gold had already been hurt by talk the U.S. Federal Reserve may be set to taper its monetary easing sooner than expected, after Standard & Poor’s lifted its U.S. sovereign credit outlook on Monday and a U.S. payrolls report last week beat forecasts.
Successive rounds of stimulus measures around the world have boosted gold prices to record highs in recent years by keeping up pressure on interest rates while stoking inflation fears. Speculation they may be set to end is now pressuring the metal.
Spot gold was down 1.1 percent at $1,371.56 an ounce at 1349 GMT, while U.S. gold futures for August delivery were down $15.20 an ounce at $1,370.80.
“The view is now that the Fed will taper quantitative easing,” Marex Spectron’s head of precious metals David Govett said. “If that happens, it’s negative for gold. A lot of the rally gold has had in the last three years has been down to QE.”
Concerns that the era of plentiful monetary stimulus is on the wane knocked European shares nearly 2 percent to six-week lows and hit peripheral euro zone bond prices. The dollar fell against the euro.
Dealers in Singapore said gold demand had eased after a jump in April, which followed the biggest two-day fall in gold prices in 30 years. Gold bars and coins were therefore easier to obtain, they said.
The world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, reported its largest inflow in over a month on Monday, of 2.7 tonnes. Its holdings remained near four-year lows, however, down 340 tonnes this year.
Silver was down 1.6 percent at $21.58 an ounce, spot platinum was down 1.9 percent at $1,474.24 an ounce and spot palladium was down 2.6 percent at $747.72 an ounce.