Gold fell more than 1 percent to its lowest level in four weeks on Thursday, as hope grew that a U.S strike on Syria could be avoided and on expectations the U.S. Federal Reserve would start to unwind its monetary stimulus soon.
Gold’s safe-haven appeal has been dented by diplomatic efforts to place Syria’s chemical weapons under international control, which may avert a U.S. military strike. Gold hit a low of $1,343.69 an ounce, its weakest since August 15, and stood at $1,346.39 by 0704 GMT, down about 1.5 percent. Prices remain far below the record high of $1,920.30 struck in 2011.
“It looks like with the politicians taking a much more measured approach to the problem in the Middle East, gold has lost its shine again,” said CIMB regional economist Song Seng Wun. “In the absence of any other development, people are taking some money off the table again.” Data suggesting inflation is starting to creep back could still support the metal, he added. U.S. gold declined $17.30 an ounce, or 1.3 percent, to $1,346.50. The Fed’s Open Market Committee (FOMC) is set to meet on Sept. 17-18, with investors fretting that the central bank will start curbing the massive bond buying programme that has boosted gold’s appeal as a hedge against inflation.
Gold prices have fallen around 19 percent this year, partly due to the Fed’s signals it would start reining in its monetary stimulus programme by year-end. “We expect that with the FOMC meeting looming on the horizon, gold will trade quietly for the next few sessions, with the resultant moves in the U.S. dollar and Treasury yields to drive gold directionally,” ANZ said in a report. Metals consultancy Thomson Reuters GFMS said gold prices were likely to contract further in 2014 due to confidence in a stabilising global economy. The physical market in Singapore saw sales of gold scraps from Indonesia, whose rupiah currency has tumbled to its weakest since 2009, while demand from main consumer India was muted.
“The physical market has been slow even though gold prices have come down. I would think the price has to fall below $1,350 before we see more buying. Weakness in regional currencies is also curbing buying interest,” said a dealer in Singapore. “India is still affected by the new regulations,” the dealer said. India has raised the import duty on gold to a record high of 10 percent to stem imports of the metal, which had helped to push the country’s current account deficit to an all-time high.
Precious metals prices 0704 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1346.39 -19.75 -1.45 -19.6
Spot Silver 22.73 -0.43 -1.86 -24.93
Spot Platinum 1461.24 -4.36 -0.3 -4.81
Spot Palladium 683.97 -6.53 -0.95 -1.16
COMEX GOLDDEC3 1346.5 -17.3 -1.27 -19.65 34756
COMEX SILVER DEC3 22.81 -0.37 -1.58 -24.75 7965
COMEX gold and silver contracts show the most active months