NEW YORK/LONDON: Gold fell around 0.5 percent in quiet trade on Monday as a Wall Street rally reduced the need for safe-haven buying and investors awaited this week's US Federal Reserve meeting for signals on the central bank's monetary stimulus plan.
Better-than-expected US retail sales and jobs data recently has fueled speculation that the Fed could announce a scaling back of its $85 billion monthly mortgage-bond buyback at the end of its two-day policy meeting on Wednesday.
The S&P 500 stock index trimmed early gains but stayed higher on traders' hopes that the Fed will reinforce its commitment to support the economic recovery.
"With very few clear choices left for monetary growth, US equities continue to show resilience. This has kept the bear alive in the precious metals market while physical demand remains firm," said Carlos Perez-Santalla at brokerage Marex Spectron.
Spot gold was down 0.6 percent to $1,381.95 an ounce by 2:33 p.m. EDT (1833 GMT).
US Comex gold for August delivery settled down $4.50 at $1,383.10, with trading volume at 65,000 lots versus its 30-day daily average of 217,000, preliminary Reuters data showed.
Volume was on track to hit its lowest daily level since April 1, Reuters data showed.
Silver fell 1.1 percent to $21.80 an ounce.
The CME Group's smaller silver contract, the physically delivered 1,000-ounce silver futures, begin trading on Monday, with total trading volume at 25 lots, according to CME's website. (Link: http://link.reuters.com/myt88t)
Turnover of the benchmark 5,000-ounce Comex silver futures was over 40,000 lots, below its 30-day average at 54,000, preliminary Reuters data showed.
ALL EYES ON THE FED
Markets have been volatile since Fed Chairman Ben Bernanke said last month the bank could scale back its stimulus measures. Since then, Fed officials have given conflicting signals.
"People are looking for more clarity - or not, as the case may be - on whether the Fed starts to ease off the Quantitative Easing bandwagon," SocGen analyst Robin Bhar said.
Most economists expect the Fed to scale back the size of its bond purchases by year end.
Any slowdown in the bond-buying program could lead to higher interest rates and drive investors from gold into
interest-bearing investments and equities.
In the physical market, demand in Asia has cooled from peak levels seen after the mid-April selloff in gold, dealers said. Bullion is down 17 percent for the year to date after 12 years of annual gains.
Indian purchases of gold have fallen since an import duty increased earlier this month. The government is trying to narrow its current account deficit by reducing gold imports.
Among platinum group metals, platinum was down 1.1 percent to $1,429.74 and palladium dropped 2.3 percent to $712.47.
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