Gold Sinks to Three-Week Low as Silver Declines on Taper

September 12, 2013 at 08:54

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Gold retreated to a three-week low on speculation that the U.S. Federal Reserve will commit to reducing stimulus next week. Silver fell, while platinum declined to the lowest in a month.

Gold has declined 19 percent this year amid expectations that the Fed will pare its $85 billion a month of bond-buying as the economy improves. While data today may show U.S. jobless claims rose for the first time in three weeks, a survey on Sept. 6 showed that the central bank will taper its quantitative easing by $10 billion at the Sept. 17-18 meeting. The U.S. and Russia meet today to discuss a plan for Syria to surrender its chemical weapons, averting a military strike.

“As geopolitical risks fade, the focus is shifting back to QE and the Fed meeting next week, and we expect the market to remain volatile till then,” said Wang Xiaoli, chief investment strategist at CITICS Futures Co., a unit of China’s biggest listed brokerage. “Although an immediate strike is unlikely, the market will continue reacting to headlines on Syria.”

Gold reached a three-month high last month as tension in the Middle East escalated and oil rallied. U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov will meet in Geneva to discuss the crisis after President Barack Obama delayed a Congressional vote sanctioning military action.

Global gold demand will fall to 2,237 tons in the second half from 2,309 tons in the same period a year earlier and 2,533 tons in the first six months as bar buying drops from a record and central banks add less, Thomson Reuters GFMS said.
Holdings in the SPDR Gold Trust, the biggest bullion-backed exchange-traded product, were unchanged for a second day at 917.13 metric tons yesterday.