Gold swings after US budget accord

Gold fluctuated after dropping from a three-week high amid concern that the Federal Reserve will reduce stimulus as US lawmakers reached a budget agreement.

Prices declined 0.8% on Wednesday as congressional negotiators reached a compromise which will ease automatic spending cuts, reduce the deficit and avoid a government shutdown when funding authority expires Jan 15.

Gold tumbled 25% this year, heading for its first annual loss in 13 years, on speculation that the Fed will start scaling back its US$85 billion in monthly bond buying as the economy improves. Data on Thursday may show US retail sales accelerated in November, while jobless claims increased. The Federal Open Market Committee will meet on Dec 17-18.

Bullion for immediate delivery rose 0.2% to $1,254.95 an ounce at 8:17am in London. Prices rose as much as 0.4% and fell 0.2% earlier today.

"The gold market will probably mark time until next week’s FOMC meeting," Howard Wen, an analyst at HSBC Securities (USA) Inc., wrote in a note. “Bullion market’s focus may shift to the upcoming release of retail sales data and initial jobless claims data. Political compromise on the budget issue removes some uncertainty and reduces risk premiums in the markets and is therefore a negative for gold.”

Gold rebounded from a five-month low on Dec 6 to touch $1,268 on Dec 10, the highest price since Nov 20, as signs of increased demand in China countered expectations that the Fed is set to pare stimulus. Volumes for bullion of 99.99 per cent purity on the Shanghai Gold Exchange, the benchmark spot contract, fell Wednesday after climbing on Dec 10 to the highest level since Nov 28.

Gold for February delivery dropped 0.3% to $1,254 an ounce on the Comex in New York in trading volume that was 34% below the average for the past 100 days at this time, data compiled by Bloomberg showed.

Silver was little changed at $20.2931 an ounce. Prices declined 0.5% on Wednesday after touching $20.488, the highest since Nov 20. Platinum added 0.3% to $1,388.25 an ounce, while palladium fell less than 0.1% to $736.88 an ounce.

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Discussion 1 : 12/12/2013 at 06:03 PM
I will never understand who bets on the US dollar and bets against Gold.

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