Commodity: Gold Drops, Goldman Cuts Forecast

Gold declined in New York as prospects that the Federal Reserve will reduce monetary stimulus curbed demand for the metal as a protection of wealth. Silver also fell.

Gold slumped to $1,268.70 an ounce on June 21, the lowest since September 2010, after Fed Chairman Ben S. Bernanke said last week the central bank, which buys $85 billion of Treasury and mortgage debt a month, may trim stimulus this year and end the program in 2014 should the economy continue to improve. Goldman Sachs Group Inc. lowered its year-end price forecasts through 2014.

Bullion has slid 23 percent this year as some investors lose faith in it as a store of value, and as speculation grew that the Fed will taper debt-buying that helped the metal rally for 12 years. Investors are assuming an earlier tapering of quantitative easing and a Fed fund rate increase sooner than Goldman economists expect, analysts Damien Courvalin and Jeffrey Currie wrote in a report dated yesterday.

“The signal from the Fed has knocked the wind out of gold,” Sterling Smith, a Chicago-based commodity futures specialist at Citigroup Inc., said in a telephone interview. “The bearish sentiment has brought about more selling and is inhibiting buyers as they expect more downside.”

Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell
Dean Popplewell

Latest posts by Dean Popplewell (see all)