Gold Spot Price: Declining on Russia’s Proposal on Syria

on Sep 10, 2013
Listen, Tuesday, September 10: Gold price has lost more than one percent today in London after Russia’s proposal that Syria surrender its chemical weapons cut safe haven demand for the precious metals. Firmer equities have also put pressure on the metal, lessening its appeal.

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One of the biggest stories for gold in recent weeks has been the possibility of a US-led military strike against Syria in response to the alleged use of chemical weapons by Damascus against civilians. The possibility of a strike prompted safe haven demand that lifted gold to $1,433.83 an ounce on August 28, its highest level since May 14. But now a military action against the Middle Eastern country seems less likely after Russia’s proposal to work with Damascus to put Syria’s chemical weapons under international control was welcomed by Damascus, and also by France, which would back the US in the case that a strike is executed.

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Gold price mirrored oil today and declined about 1.5 percent to $1,366.63 an ounce in London by 13:15 BST. Comex gold for delivery in December was down to $1,366.10 an ounce in New York.

“Due to the fading of geopolitical tensions, gold prices are expected to decline,” analysts at India-based Karvy Comtrade Ltd. wrote today in a report, as quoted by Bloomberg. “A tapering of quantitative easing by the Fed is also a concern. Gold prices might remain under pressure.”
**Quantitative easing**
!m[Firmer Equities also Weigh on the Precious Metal](/uploads/story/5378/thumbs/pic1_inline.jpg)

Concerns that the US central bank will start tapering its stimulus programme known as quantitative easing have once again been amongst the central themes on the gold markets today. The programme, which sees the Fed buying $85 billion in treasury and prime mortgage debt every month, has been one of the strongest drivers for gold and a potential scale back would hurt the precious metal. According to a Bloomberg survey, conducted on September 6, the Fed will trim its monthly debt purchases by $10 billion at its FOMC meeting on September 17-18. The forecast comes despite last week’s US payroll report showing that US companies added fewer-than-expected jobs in August.

Traders on Tuesday have been also seduced by firmer Asian stocks which hit three-month highs. Today’s release of strong industrial output and retail sales from China added more indications that the economic slowdown in the Asian giant may have halted.
The increased appeal of riskier assets such as equities has trimmed demand for safe havens.

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