Gold Drops Before First Post Bernanke FOMC

Gold extended a decline from a six-month high in New York as speculation that the Federal Reserve will continue cutting stimulus curbed demand for the precious metal as a store of wealth. Silver fell.

Gold advanced 13 percent this year as turmoil in Ukraine and signs of slowing economic growth increased demand for haven assets. Prices rebounded from the biggest annual slump since 1981 even as the U.S. central bank started to scale back asset purchases. Data released yesterday showed U.S. industrial output rose in February by the most in six months. The Fed begins a two-day meeting today.

“We expect the Fed to continue tapering its quantitative easing as the year progresses, which would put a cap on gold prices,” Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., said in a report today. “We also believe the downside to be protected because of the lingering Ukrainian uncertainty.”

Gold for April delivery slid 1 percent to $1,359.60 an ounce by 7:55 a.m. on the Comex in New York. It reached $1,392.60 yesterday, the highest since Sept. 9, before ending the day down 0.4 percent. Futures volume was 35 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg showed. Bullion for immediate delivery declined 0.6 percent to $1,358.72 in London.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza