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PRECIOUS-Gold slumps to four-month low after Fed minutes
November 20, 2013 / 11:11 AM / 4 years ago

PRECIOUS-Gold slumps to four-month low after Fed minutes

* Fed could start tapering at one of next few meetings
-minutes
    * Gold posts biggest one-day drop since Oct. 1
    * Frantic U.S. gold futures trade after Fed statement
    * Coming up: U.S. producer price index Thursday


    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, Nov 20 (Reuters) - Gold fell 2.5 percent to
a four-month low on Wednesday after minutes of the Federal
Reserve's October meeting showed U.S. central bankers could
start scaling back monetary stimulus at one of their next few
meetings.
    Bullion slid below $1,250 an ounce for the first time since
July 10 and notched its biggest one-day drop since Oct. 1. 
    Gold, which has been ultra-sensitive to the prospect of the
Fed scaling back its quantitative easing, sharply underperformed
other assets after the news, with U.S. equities and
Treasuries prices both down around 0.5 percent,
while the dollar rose about 0.5 percent.
    The pace of trading was frantic in the gold futures market,
with almost 17,000 U.S. Comex December contracts traded. Total
turnover for the day was at 240,000 contracts, on track to hit a
two-month high. 

    Minutes of the Fed's October policy meeting showed that Fed
officials felt they could decide to start scaling back the U.S.
central bank's massive asset purchase program at one of its next
few meetings, provided this was warranted by economic growth.
 
    "The minutes bring the risk of Fed tapering back to the
forefront, even though many policymakers had said in public that
it would not happen in the near future," said Frank McGhee, head
precious metals dealer at Chicago commodities brokerage Alliance
Financial LLC.
    "Tapering is still definitely on the table," McGhee said.   
    Spot gold was down 2.4 percent at $1,244.31 an ounce
by 3:36 p.m. EST (2036 GMT), having dropped to a four-month low
of $1,240.69.
    Prior to the Fed minutes, December gold settled down
$15.50 an ounce at $1,258 an ounce.
    A sudden drop in price earlier in the session appeared to
rattle bullion investors. Within a minute's time at 6:27 a.m.
EST, gold tumbled more than $11, or nearly 1 percent, to $1,258
an ounce, triggering two consecutive 10-second momentary pauses
aiming to prevent cascading stop-loss orders, CME Group said.
    On Wednesday, St. Louis Fed President James Bullard said
recent U.S. economic data is looking better and a solid jobs
report for November would increase the likelihood that the U.S.
central bank would start to scale back bond buying at its
meeting next month. 
    "The choppiness in gold is going to continue until we get a
definitive answer about whether the Fed is going to taper," said
Thomas Capalbo, a precious metals broker at New York futures
brokerage Newedge.
  
    DEMAND LANGUISHES, SUPPLY UP
    Holdings in the SPDR Gold Trust, the world's largest
gold-backed exchange-traded, fell 1.5 tonnes to 863.01 tonnes on
Tuesday, their lowest since February 2009. 
    On the supply side, output from the world's gold mines is
set to hit record highs this year. 
    Silver was down 2.4 percent at $19.83 an ounce,
having touched a three-month low of $19.76.
    Platinum fell 1.6 percent to $1,389 an ounce, having
hit a one-month low at $1,388, while palladium dropped
1.4 percent to $708.25 an ounce.
    
 3:36 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1258.00 -15.50  -1.2  1240.20 1275.70  209,457
 US Silver DEC  20.058 -0.276  -1.4   19.780  20.490   59,512
 US Plat JAN   1399.60 -20.30  -1.4  1392.50 1420.00    9,964
 US Pall DEC    713.85  -8.05  -1.1   709.20  723.50    8,739
                                                              
 Gold          1244.31 -30.33  -2.4  1240.69 1276.06         
 Silver         19.830 -0.490  -2.4   19.760  20.490
 Platinum      1389.00 -22.80  -1.6  1395.50 1417.25
 Palladium      708.25  -9.75  -1.4   712.75  721.75
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        240,389   143,970   155,602     20.23    1.33
 US Silver       78,436    47,125    54,080     26.98   -0.38
 US Platinum     10,091     9,465    12,987     19.13   -0.26
 US Palladium    14,195     6,374     5,773     23.12    0.75

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