Tags: Gold | Silver | Tumble | Fed | Announcement

Gold, Silver Tumble Ahead of Fed Announcement

Wednesday, 03 Nov 2010 12:55 PM

Gold slid more than 2 percent on Wednesday and silver tumbled as spot prices were knocked by heavy liquidation of New York metals futures ahead of an announcement on monetary policy from the Federal Reserve.

Spot gold slipped to a low of $1,327.80 an ounce and was bid at $1,333.95 an ounce at 1542 GMT, against $1,357.00 late in New York on Tuesday. U.S. gold futures for December delivery eased $23.60 an ounce to $1,333.30.

Prices came under pressure from a firmer dollar in earlier trade but held in a fairly narrow range as traders awaited news on the scope and timing of the Fed's expected quantitative easing program. They slid sharply as support levels gave way.

"It is all about last-minute profit taking before QE2," said Saxo Bank analyst Ole Hansen. "Stops had been building up below $1,350 over the last couple of days and once that went, it was all over," Hansen said.

"This move leaves the market in a much better position to react to gold (bullish) news after the Fed," he added.

A Reuters poll found on Wednesday that most leading economists expect the Fed to buy between $80 billion and $100 billion worth of assets per month under a new program to bolster the struggling economy.

Estimates for how long the Fed will print money and how much it will spend overall varied from $250 billion to $2 trillion.

Macquarie analyst Hayden Atkins said the initial euphoria over QE and its potential impact on gold had largely worn off, and that while the metal may see some support if the policy meets expectations, a major lift is unlikely.

"There may be some upside surprise but (markets) pretty quickly priced out a Big Bang policy," he added. "It might be a mild positive, but I think the reality of what could happen is in most people's minds already."

FOCUS CHANGE

"It is good to actually get this out of the way, so we can start to focus on other global events that mean more to different markets," he added.
"There has been a lot of talk about what has to happen with exchange rates globally, but that has probably been ignored because of the big moves in currency markets on QE expectations. Maybe we will start to focus more broadly now, and that will drive the market going forward."

Elsewhere wholesale physical gold demand in the world's biggest bullion consumer India was healthy as the country's busiest gold-buying festival, Dhanteras, got under way, with local demand helped by the strong rupee.

Traders and retailers expect volume to rise up to 20 percent despite near-record prices as customers line up to make the most of the auspicious festival.

Holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, slipped on Tuesday, however, by around 1 ton to 1,292.189 tons. ETFs issue securities backed by physical stocks of metal.

On the supply side of the market, the Xinhua news agency reported that China had found a 100-tonne gold deposit in Inner Mongolia, worth about $5.25 billion. China is the world's biggest gold miner, and its number two consumer.

Silver also fell to $24.15 an ounce against $24.91, tracking gold. Holdings of the world's number one silver ETF, the iShares Silver Trust eased further from the record high they hit last month on Tuesday.

Platinum was at $1,697.25 an ounce against $1,708.50, while palladium was at $638.47 against $643.

© 2017 Thomson/Reuters. All rights reserved.

   
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Gold slid more than 2 percent on Wednesday and silver tumbled as spot prices were knocked by heavy liquidation of New York metals futures ahead of an announcement on monetary policy from the Federal Reserve. Spot gold slipped to a low of $1,327.80 an ounce and was bid at...
Gold,Silver,Tumble,Fed,Announcement
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2010-55-03
Wednesday, 03 Nov 2010 12:55 PM
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