Gold Spot Price: Retreating on Syria Agreement and QE Tapering Prospects

on Sep 16, 2013
Listen, Monday, September 16: Gold price has fallen today due to the growing conviction that the US central bank will start tapering its stimulus measures this week. Further denting the precious metal’s safe haven demand was the agreement between the US and Russia over a plan to destroy Syria’s chemical weapons, which diminished the prospects of a US-led military strike against Syria.

Gold price fell today more than one percent to $1,310.41 an ounce as of 13:24 BST, after having rallied to $1,334.46 an ounce earlier today on a weakened US dollar.

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**FOMC meeting**
The most important event for gold this week will undoubtedly be the US Federal Reserve FOMC meeting on September 17-18, where the Fed is expected to decide whether to reduce stimulus. The consensus is that the US central bank will initially cut its quantitative easing programme, through which it currently buys $85 billion worth of treasury and prime mortgage debt every month, by $10 billion or perhaps $15 billion.

A reduction of QE would hurt gold prices, which have in recent years benefitted significantly from the Fed’s ultra-loose monetary policy.
**Syria agreement**
The prospect of a US-led military strike against Syria in response to an alleged use by Damascus of chemical weapons against civilians has provided some support for gold in recent weeks leading to significant gains despite the negative expectations regarding stimulus. However, those prospects have faded amid recent effort to find a diplomatic solution to the situation. The culmination of these efforts were reached on September 14 in Geneva, with the US Secretary of State John Kerry and Russian Foreign

Minister Sergei Lavrov agreeing on a framework for locating and destroying Syrian President Bashar al-Assad’s stockpiles of poison gas. With the possibility of a armed conflict diminishing, safe haven demand is also waning.
!m[Physical Buying in India and China “Quiet”](/uploads/story/5488/thumbs/pic1_inline.jpg)
According to Bernard Sin, head of currency and metal trading at MKS (Switzerland) SA in Geneva, gold demand in India and China is “quiet”. The two countries are the No. 1 and 2 gold consumers in the world, respectively.

“There’s no war,” Sin said by phone today, as quoted by Bloomberg. “Physical demand is quiet.”
Meanwhile, a weekly report by the Commodity Futures Trading Commission showed on Friday that hedge funds and money managers cut bullish bets on gold futures and options in the US gold market for the first time in five weeks.
However, the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings decreased 0.66 percent to 911.12 tons on Friday – the biggest decline since August 1.


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