Precious Metals Price Watch: Gold Drops Further on Uncertainty over Fed Stimulus

on Jun 18, 2013

The gold price has eased for a second day today, June 18, with markets waiting for the Federal Reserve to start its two-day policy meeting which is expected to provide information as to when the US central bank might taper its quantitative easing programme. The silver price has tracked gold lower, whereas the platinum price has been under pressure due to a drop in European car sales.

**Gold Price Retreats ahead of Fed Meeting**
Spot gold shed 0.5 percent to trade at $1,378.14 an ounce as of 09:29 GMT, whereas US gold futures for settlement in August were down $5 an ounce at $1,378.10. The gold price has been soft ahead of the two-day meeting of the Federal Open Market Committee (FOMC) which starts today, with investors waiting for cues when the US central bank might scale back its monthly bond purchases, which in recent years have boosted the appeal of gold as a hedge against inflation.

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“Everyone is hoping (Federal Reserve Chairman Ben) Bernanke will shed some light on the uncertainty regarding further bond purchases,” Reuters quoted Commerzbank analyst Daniel Briesemann as saying. “It looks very much like this market doesn’t like this uncertainty, but I’m not sure what would be worse for gold: if the Fed says almost nothing, or if they signal an end or reduction to QE. Both would be negative for gold.”

**Global Gold ETP Holdings to Fall Further, Societe Generale Says**
Holdings in gold-backed exchange-traded products (ETPs) fell 0.6 metric tonnes to 2,116.2 tonnes yesterday, the lowest since March 2011. Societe Generale expects ETP gold holdings, already down 20 percent this year, to shed another 285 metric tonnes in 2013.
“The dramatic gold sell-off in April, combined with the prospect of the Fed starting to taper its QE programme before year-end, has resulted in a paradigm shift in many investors’ attitude towards gold,” Societe Generale analysts wrote in a report, as quoted by Bloomberg. “Inflation has so far stayed low. We would expect large-scale gold selling from investors who bought gold as a hedge against medium-term inflation.”

Physical demand has also eased in recent weeks with India, the top gold consumer, trying to reduce its record current account deficit by raising the gold import duty.
**Silver, Platinum Price Update**
!m[Platinum Price Dragged Down by Disappointing European Car Sales Data](/uploads/story/3183/thumbs/pic1_inline.png)
Platinum for July delivery lost 0.4 percent to $1,429.30 an ounce, after falling to $1,425.10, the lowest since April 24. Platinum, which is used in catalytic converters, was dragged down by data by the

European Automobile Manufacturers’ Association showing that European car sales declined to a 20-year low last month.
The silver price has also lost ground today, with futures for July delivery shedding 0.4 percent to $21.67 an ounce in New York. Silver futures have lost about 28 percent in 2013.
Meanwhile, silver coin sales by the US Mint are headed for record highs. Sales have reached 24.03 million ounces so far this year, the largest volume on record for the first six months of a year.


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