Gold Tanks on FED Propaganda

January 4, 2013 at 09:36


Gold tumbled, poised for the longest run of weekly losses since 2004, as Federal Reserve policy makers said that they’ll probably end asset purchases this year and investors cut holdings by the most since May. Silver slumped to the lowest since August while palladium and platinum dropped.

Bullion is 0.4 percent lower this week, set for a sixth weekly drop. Holdings in exchange-traded products, which reached a record 2,632.516 metric tons on Dec. 20, decreased 0.4 percent yesterday, data compiled by Bloomberg showed.

Fed policy makers said that they will probably end their $85 billion monthly bond purchases sometime in 2013, with members divided between a mid- or end-of- year finish, according to the record of the Federal Open Market Committee’s Dec. 11-12 gathering released yesterday. The Dollar Index (DXY) rallied to the highest in six weeks today, and was set for the biggest weekly gain since July, weighing on commodities including oil.

“A big part of gold’s bull market has been loose monetary policy and an end to that will hurt the rally,” said Wang Xiaoli, chief investment strategist at CITICS Futures Co., a unit of China’s biggest listed brokerage. “It’s still too soon to call the end because these lower prices may finally attract the physical buyers who have largely been absent.”

Twenty analysts surveyed expect gold to advance next week on concern that U.S. lawmakers are doing too little to control the deficit in the world’s largest economy, while five were bearish and two were neutral.

Cash bullion advanced 7.1 percent in 2012, capping a 12th annual gain as the Fed announced a third round of so-called quantitative easing, the Bank of Japan expanded asset purchases and China approved additional infrastructure spending. Gold’s relative appeal is likely to diminish as so-called fear trades fade, according to Tom Kendall, head of precious-metals research at Credit Suisse Group AG and the most accurate precious-metals forecaster in the past eight quarters.