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Gold falls 1pc as Fed tapering weighs

London, January 30, 2014

Gold fell around 1 percent on Thursday as the dollar rose after the US Federal Reserve pushed ahead with reducing its monetary stimulus and investors took profits made the previous session.

The Fed trimmed its monthly bond-buying programme by another $10 billion as it stuck to a plan to wind down its extraordinary economic stimulus, despite recent turmoil in emerging markets. It announced a similar cut in December.

"There is no surprise in the fact that tapering has continued," Mitsubishi analyst Jonathan Butler said.

"And barring any major change in the US macroeconomic situation, we are still of the view that by the end of the year we are likely to see tapering completely wound up or getting close to that, which is going to weigh on gold in the next few months."

Spot gold was down 1 percent to $1,255.20 an ounce by 1054 GMT, while US gold futures for February delivery were down $7.70 at $1,254.70 an ounce.

Prices gained nearly 1 percent on Wednesday, when analysts said the Fed's move to taper had already been fully discounted ahead of the announcement, while the central bank's failure to address economic uncertainty was also seen as potentially benefitting safe haven assets like gold.

But tapering is generally deemed negative for gold, which thrived when quantitative easing measures were introduced during the credit crunch years as ample central bank liquidity and a low interest rate environment encouraged investors to put money into non-interest-bearing assets.

Gold dropped 28 percent last year on an improving economy, and in anticipation of the Fed scaling back on its stimulus. - Reuters
 




Tags: Gold | precious metal |

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