Gold Falls Before FOMC As Taper Set to Continue

Gold futures fell, snapping the longest rally since February, on speculation that the Federal Reserve will further curb U.S. monetary stimulus, damping demand for the precious metal as an alternative investment.

The Federal Open Market Committee, which starts a two-day meeting today, reduced the monthly pace of bond purchases by $10 billion in each of the past four meetings. U.S. and Iranian officials met in Vienna as President Barack Obama weighs options against the insurgency by Sunni militants in Iraq.

Through yesterday, gold fell 8.1 percent in the past 12 months as equities surged and the Fed reduced stimulus. The central bank will probably raise its benchmark interest rate faster than money-market investors expect, according to a majority of economists surveyed by Bloomberg News.

“It seems that the Fed will stay on course with tapering, and worries about higher rates are increasing,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “The safe-haven premium because of Iraq is also coming off.”

via Bloomberg

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