PRECIOUS-Gold falls as Fed move raises concern on stimulus scope

Wed Dec 12, 2012 11:48pm EST

* Stop-loss selling triggered as prices dropped below key
    * Physical gold buying interest emerges below $1,700/oz
    * Coming up: U.S. retail sales, Nov; 1330 GMT

 (Adds details, comments; updates prices)
    By Rujun Shen
    SINGAPORE, Dec 13 (Reuters) - Gold dropped about 1 percent
on Thursday after the Federal Reserve linked its monetary policy
to unemployment, raising concerns that future economic stimulus
could be limited.
    Gold benefits from easy monetary policy as it drives
investors who fear diminishing value in fiat currencies to seek
safety in hard assets such as bullion. Gold has risen nearly 9
percent so far this year. 
    The Fed said it plans to buy $45 billion in longer-term
Treasuries each month on top of the $40 billion monthly purchase
of mortgage-backed securities, as expected, but set unemployment
and inflation thresholds for exit strategy. 
    "This announcement is a bit confusing to gold investors as
it linked policy to unemployment, etc.," said a Tokyo-based
trader. "Perhaps the market wanted unlimited QE."
    Last month the U.S. unemployment rate dropped to a near
four-year low of 7.7 percent, although the better number was the
result of a lower number of job-seekers.  
    Spot gold dropped 1 percent to $1,693.8 an ounce
earlier in the day, before paring some losses to stand at
$1,700.01 by 0433 GMT. Fed's move to buy bonds had pushed up
prices to a near two-week top of $1,723.01 on Wednesday.
    When prices dropped below the 100-day moving average above
$1,705, stop-loss selling was triggered, traders said.
    The most-active U.S. gold futures contract lost as
much as 1.3 percent to $1,695.5 an ounce, and recovered to
$1,701.70. Nearly 27,000 lots already changed hands, an usually
high number for early Asian trading hours.
    Physical gold buying demand is expected to pick up after
prices fell below $1,700 level, traders said.
    "Physical demand seems to be supportive, but can't offset
all investor selling," said the Tokyo-based trader.
    But gold is likely to remain rangebound, as many investors
are closing books for the year, while the difficult U.S. budget
talks keep them away from big bets.
    The negotiation could drag on past Christmas given sharp
differences between congressional Republicans and the White
House on how to avert steep tax hikes and budget cuts.
    "The near term risk is a stronger dollar," said Jeremy
Friesen, commodity strategist at Societe Generale in Hong Kong.
"The 'fiscal cliff' is going right to the end, and that could be
support the dollar and take some shine off gold." 
    The dollar, seen as an ultimate safe haven, is likely to
attract investors worried about the uncertainty in the U.S.
fiscal situation. A stronger greenback pressures dollar-priced
commodities by making them more expensive for buyers holding
other currencies. 
    In other metals, U.S. silver fell more than 2
percent to $32.88 an ounce, before paring losses to stand at
$33.10. Spot silver dropped nearly 2 percent to $32.79
and stood at $33.02.
    Spot platinum fell 0.8 percent to $1,619.07, easing
from $1,643.50 hit on Wednesday, its highest since Oct. 19. Spot
palladium eased to a one-week low of $679.72.
    Precious metals prices 0433 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1700.01  -11.54   -0.67      8.71
  Spot Silver        33.02   -0.42   -1.26     19.25
  Spot Platinum    1619.07  -13.68   -0.84     16.23
  Spot Palladium    686.00   -6.50   -0.94      5.13
  COMEX GOLD FEB3  1701.70  -16.20   -0.94      8.61        26702
  COMEX SILVER MAR3  33.10   -0.69   -2.03     18.56         8067
  Euro/Dollar       1.3084
  Dollar/Yen         83.56
  COMEX gold and silver contracts show the most active months
 (Editing by Himani Sarkar)
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Comments (3)
That provided a good chance for people to liquidate their positions,” said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.

That is not right. A seller would not damage the chart to sell position. This guy whoever did the dump was trying to trigger stop loss sale to cover his position.

Asian market needs some firm hands to protect your longs. Take less position, more fund in your account, do not stop loss.

It has happened in Asian market three times already.

Dec 12, 2012 10:56pm EST  --  Report as abuse
take less position. Do not use stop loss. This guy has done it three times.

Dec 12, 2012 10:58pm EST  --  Report as abuse
Derak wrote:
What was everyone hoping for anyway? a Third, simultaneous program by the fed to be announced in addition to the 40 Billion and 45 Billion a month programs they are extending? Shoot, why even wait for the Fed to announce they were going to continue trying to cause inflation if that is not reason to buy; people could have just sold earlier.

Seeing as we have the same people in charge who brought us the last three years of stagflation and nearly tripled the price of silver, I see this as a second chance to buy the dip.

What is the biggest worry, that 0bama will stop printing and borrowing? Well that won’t happen. So let’s see, Europe will go broke before the US? Well 0bama will just promise another trillion in printed bailouts for them, transfering value of the dollar to the Euro. What about the fiscal cliff? If we increase taxes and cut spending, then this will contract the money supply, which the fed will make more moves to stop, but who in their right mind thinks that 0bama will cut spending, especially entitlements? He uses taxpayer money to buy phones and then gives them to non-workers to buy votes for crying out loud. As I type this, 0bama claims to want deficit reduction and simultaneously wants unemployment 99 weeks of benefits to be further into 2013 for those whose 99 weeks are expiring.

He has already increased the food stamps per month per person and dramatically increased the number of people on them and no longer requires able-bodied welfare/stamp recipients to apply for jobs; so don’t expect any decrease in this spending on handouts any time soon. Not to mention, the fiscal cliff would dramatically reduce stocks, encouraging flight to safe-haven investments, and the fed will try to “hide the decline” in the economy by further printing in an attempt to buoy stocks. 0bama will then point to the Dow and say the economy is still going in the right direction…even though it is just companies taking nearly free government loans and buying their own stock back to make themselves appear solvent while others use the newly created cash to buy into the stock market.

Or… republicans can give 0bama the higher taxes he wants, which are payroll, not cap gains (yet) and 0bama will pretend to cut spending, but has predictably not put any cuts on the table yet (and never will), and we will be in for a replay of the last several years of stagflation with runaway deficit spending, printing, entitlements, and slightly higher payroll taxes that won’t make a dent in anything.

The biggest danger seems to be the cap gains tax increase in 0bamacare, which will drive money out of stocks to other places, wink, but does cap gains apply to profit off of bullion sales? If it does, their are at least silver investments that are still legal tender, and therefore not reportable as profit because selling them is just trading tender for tender. Also, one could shift investments to currencies, and picking the dollar under 0bama would be asinine…and movements in the dollar are reflected in the price of metals pretty immediately.

So, what else is there besides a big turnaround in the employment picture to key in the fed to stop printing as much money? Does anyone believe that is happening when the reason unemployment went down was because of people dropping out of the workforce (i.e. running out of unemployment benefits) and this is in spite of the temporary hiring for Christmas, without which we would have had about 100K jobs created?

What am I missing here? What are you all so afraid of? Will 0bama confiscate gold under executive order? He may think he has the power, but do you think he will bother confiscating other metals? I think I’ll add some gold to my port, but for full disclosure, I will hang onto my silver as well.

Dec 12, 2012 11:30pm EST  --  Report as abuse
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