PRECIOUS-Gold falls, posts sharp weekly drop on Fed worries

Fri Nov 1, 2013 4:02pm EDT

Related Topics

* Fears of Fed stimulus reduction trigger selling
    * U.S. Oct manufacturing activity hits 2-1/2-yr high
    * Dollar index rises to six-week highs
    * Coming up: U.S. factory orders, durable goods Friday


    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, Nov 1 (Reuters) - Gold fell about 1 percent
on Friday, posting its biggest weekly loss in seven weeks, as
renewed anxiety about the U.S. Federal Reserve could scale back
its bond-buying stimulus prompted bullion investors to reduce
positions.
    The precious metal was down 3 percent for the week,
reversing two consecutive weekly gains.
    Richmond Fed President Jeffrey Lacker said on Friday that
the U.S. labor market has recovered enough in the last 14 months
to allow the central bank to reduce its bond-buying stimulus.
 
    Any sign that the Fed will reduce its $85 billion monthly
bond-buying program is likely to weigh heavily on gold prices.
Funds and institutional investors have in recent years bought
gold as a hedge against inflation and monetary actions by
central banks.
    "Overall, investors have expected a reduction in monetary
easing. So, even though there have been no changes effective
this year, the market is selling off in anticipation of Fed
tapering eventually," said Erica Rannestad, precious metals
analyst at the CPM Group.  
    Spot gold was down 0.9 percent at $1,311.50 an ounce
by 2:57 p.m. EDT (1857 GMT), extending Thursday's 1.4 percent
slide. Spot gold has ended lower every day this week.
    U.S. Comex gold futures for December settled down
$10.50 to $1,313.20 an ounce, with trading volume about 20
percent below its 30-day average, preliminary Reuters data
showed.
    The dollar rose to a six-week high after U.S. data
showed the country's manufacturing sector expanded at its
fastest pace in 2-1/2 years last month, though a separate
reading cast doubt on the strength of factory activity growth.
 
    In addition, a sharp slowing in euro zone inflation, which
left markets suddenly considering the chance of a cut in
interest rates soon by the European Central Bank, weighed on the
euro against the dollar.
    As a gauge of investor sentiment, the SPDR Gold Trust,
the biggest gold-backed exchange-traded fund, reported an
outflow of 34 tonnes in October, its biggest monthly drop since
July. 
    That brings its outflows for the year to 479 tonnes, or more
than $20 billion this year. Holdings of the fund are near
four-year lows of 872 tonnes.
    Spot silver was down 0.4 percent to $21.76 an ounce.
It had fallen 3.5 percent on Thursday, its biggest one-day loss
in a month.
    The biggest silver ETF, the iShares Silver Trust, also
recorded a monthly outflow of 127.4 tonnes in October, its first
since June.
    Among the platinum group, platinum inched down 26
cents to $1,448.24, while palladium edged up 0.2 percent
to $736.51 an ounce.
 2:57 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1313.20 -10.50  -0.8  1305.60 1327.30  124,579
 US Silver DEC  21.837 -0.030  -0.1   21.705  21.995   34,206
 US Plat JAN   1451.90   3.50   0.2  1445.80 1458.90   11,352
 US Pall DEC    738.25   1.45   0.2   732.30  742.00    4,626
                                                              
 Gold          1311.50 -11.69  -0.9  1306.73 1327.25         
 Silver         21.760 -0.090  -0.4   21.720  21.970
 Platinum      1448.24  -0.26   0.0  1449.00 1456.00
 Palladium      736.51   1.51   0.2   735.50  739.50
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        131,177   154,161   188,108     20.48    0.27
 US Silver       38,263    42,028    55,755      29.2    0.02
 US Platinum     11,878    13,427    12,888     17.66    0.00
 US Palladium     5,824     4,073     5,653
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