Gold Fluctuates as Investors Weigh Fed Taper Bets

September 27, 2013 at 08:14

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Gold swung between gains and losses as investors weighed speculation that the Federal Reserve may taper stimulus after an unexpected decline in U.S. jobless claims against the risk of a possible government shutdown. Platinum slumped to the lowest level since July.

Bullion in London is on course for the first monthly loss since June. Gold for December delivery climbed 0.2 percent to $1,326.20 an ounce on the Comex.

First-time claims for unemployment benefits dropped by 5,000 to 305,000 last week, Labor Department data showed yesterday, compared with the 325,000 median projection in a Bloomberg survey. Gold has dropped 21 percent this year as speculation increased that the Federal Reserve will curb its $85 billion in monthly bond purchases and equities rallied.

“The market has been looking at the good and the bad data,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “When it’s been bad, the market thinks no QE tapering and up goes gold. When it’s been good, the market thinks tapering and gold goes down.” QE refers to quantitative easing.

Twenty-four of 41 economists surveyed last week said the Fed will pare stimulus in December. The central bank unexpectedly left the program unchanged last week, spurring a 4.1 percent rally in gold on Sept. 18. Bullion rose 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system by buying debt.

While data due next week may show U.S. employers added more workers to their payrolls this month than in August, boosting the outlook for the largest economy, the risk of a U.S. government shutdown remains. Congress hasn’t passed a budget for the 2014 fiscal year, which starts on Oct. 1. Separately, Congress must vote to raise the nation’s borrowing limit. Treasury Secretary Jacob J. Lew has told lawmakers that measures to avoid breaching the debt ceiling will be exhausted by Oct. 17.

Debt ceiling concerns may support gold prices, James Steel, an analyst at HSBC Securities (USA) Inc., wrote in a note a note yesterday, citing the “non-trivial” possibility that the U.S. Treasury may be unable to meet financial obligations.

Platinum dropped as much as 0.9 percent to $1,399.18 an ounce, the lowest since July 12, and was at $1,411.60. The metal is heading for a fifth weekly loss and the first monthly drop since June.

Prices may be curbed as industrial users remain well supplied, gold prices decline and a weaker South African rand boosts profitability for producers, Deutsche Bank AG said Sept. 25. While the threat of labor action remains, disruptions so far this year have been low, it said.

Silver for immediate delivery was 0.6 percent lower at $21.606 an ounce, set for a third weekly loss. Palladium rose 0.4 percent to $723.95 an ounce, poised for a quarterly advance