Gold spot price in hands of US Fed today

on Dec 18, 2013
Updated: Oct 21, 2019
Listen Wednesday, December 18th:_ The XAU/USD has today been trading within the range 1237.53 to 1228.56 and is at the moment at 1233.50. This particular market is especially keen to learn the FOMC decisions, due at 19.00 UTC today, on QE and interest rates.

The spot price of gold has fallen some 26 percent this year on the growing acceptance that the US Federal Reserve will start to reduce its $85 billion a month bond purchases, to address an ultra-loose monetary policy which pushed gold pricing to record highs in 2011.
Sharps Pixley chief executive Ross Norman says that “tapering has been like the sword of Damocles holding above gold’s head for so long now. Once it is behind us, we will have some certainty over what will come”.

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Norman believes that “ultimately what will determine gold’s direction in the immediate aftermath of the announcement will be the US dollar, and how it responds”. He notes that ordinarily the gold market “would have quietened down at this time of year, but you feel that gold is holding on for this last hurrah”.
Joyce Liu, an investment analyst at Phillip Futures Pte, reckons that “a small-scale reduction may cause gold to fall to a range $30-$60 lower than its current range but knee-jerk reaction the likes of April and June is less likely”.

Liu notes that the markets are already well prepared for a small reduction in stimulus, given the Fed’s stance to this point, and believes that “the market is unlikely to head straight into another selling frenzy on fears of rising interest rates” but is likely to “pull funds out of speculative and leveraged instruments”.

Interest in physical gold fund investment continues to fade, with the world’s biggest gold-backed ETF (exchange-traded fund), New York’s SPDR Gold Shares, yesterday logging a further 2.1 tonnes gone from its vaults.
In contrast, China – the world’s largest gold consumer – saw trading volumes for 99.99 percent purity gold increase today to about 13 tonnes, some five tonnes up from yesterday.

Physical demand in India remains subdued, with an ongoing lack of supply in the market keeping premiums high. The government earlier this year lifted gold import tariffs and tied imports to export volumes in a bid to reduce the country’s current account gap.
A Reserve Bank of India spokesperson today said that it would be premature to remove the restrictions on gold imports.
Macquarie Bank observes on point: “We think gold imports (in India) should start to pick up in recent months regardless of policy as the industry adapts to the new measures. But government policy will remain the key determinant.”
According to Australia’s Bureau of Resources and Energy Economics, the ’lucky country’s’ gold exports will likely shrink some four percent in 2013-2014 to 270 tonnes. Australia is the second-largest gold producer in the world after China.
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