Gold fell from a three-month high as minutes from the Federal Reserve’s last meeting indicated stimulus cuts would likely continue, crimping demand for the precious metal as an alternative investment.
Several policy makers said that in “the absence of an appreciable change in the economic outlook, there should be a clear presumption in favor of continuing to reduce the pace” of bond purchases at each meeting, according to minutes released today. Some officials raised concern that inflation is too low. Gold climbed 9.8 percent this year as signs that U.S. growth is faltering fueled bets that the pace of stimulus cuts may slow.
“The minutes reveal that the Fed is not looking at slowing the pace of stimulus,” Frank Lesh, a trader at FuturePath Trading LLC in Chicago, said in a telephone interview. “Also, absence of inflation is not good for gold.”
Gold futures for April delivery declined 0.8 percent to $1,316.10 an ounce in electronic trading at 2:37 p.m. on the Comex in New York. Prices settled at $1,320.40 at the end of regular trading before the minutes were released,
The metal reached $1,332.40 yesterday, the highest since Oct. 31. Last month, the central bank trimmed monthly bond purchases by $10 billion for a second straight month to $65 billion. Fed Chairman Janet Yellensaid Feb. 11 that reductions aren’t on a “pre-set course.”
Bullion surged more than 500 percent in 12 straight years of gains through 2012 as the dollar weakened. The rally accelerated from December 2008 to June 2011 as the Fed expanded its balance sheet through debt purchases and held borrowing costs at a record low in a bid to revive growth amid a U.S. recession. Prices reached a record $1,923.70 in September 2011.
“Gold will continue to find support from the easy-money policy,” Michael Gayed, the chief investment strategist who helps oversee $250 million at New York-based Pension Partners LLC, said in a telephone interview.
Through yesterday, futures gained for nine straight sessions, the longest streak since July 2011. Holdings in the SPDR Gold Trust, the biggest bullion exchange-traded product, climbed 0.5 percent last week, a third straight increase and the longest streak since August.
Goldman Sachs Group Inc. last week affirmed a forecast for lower prices. The metal will drop to $1,050 by the end of the year, analysts led by Jeffrey Currie said in a report, citing expectations for improving U.S. growth. Prices fell 28 percent in 2013, the most since 1981. Some investors lost faith in the precious metal amid a rally in equities and as inflation remained low.
Silver futures for delivery in March slipped 0.2 percent to settle at $21.85 an ounce. Prices yesterday reached $21.98, the highest since Nov. 7, and capped an 11th straight gain, the longest rally since 1979.