Gold May Decline From Seven-Week High as Fed Damps Stimulus Speculation
By Nicholas Larkin - Jun 23, 2011 4:09 PM GMT+0800
Gold may decline from a seven-week high in London as the U.S. central bank damped speculation it would expand stimulus measures and the dollar strengthened, curbing demand for the metal as an alternative investment.
The dollar gained versus six major currencies after the Federal Reserve’s policy meeting yesterday and on prospects Greek Prime Minister George Papandreou will face difficulty in getting parliamentary approval next week for a package of budget cuts and asset sales. Gold yesterday climbed within 1.3 percent of a record set last month.
“People are now expecting no QE3,” and that’s one of the factors pressuring gold, said Bernard Sin, the head of currency and metal trading at MKS Finance SA, a bullion refiner in Geneva. “The market is reacting a bit to the dollar, and that’s why we’re seeing a bit of profit-taking. In the longer term, people will move back into gold.”
Immediate-delivery gold fell $3.63, or 0.2 percent, to $1,545.32 an ounce by 8:40 a.m. in London. The metal reached $1,558.25 yesterday, the highest price since May 2. Gold for August delivery was down 0.5 percent at $1,545.30 an ounce on the Comex in New York.
Policy makers decided to keep the Fed’s balance sheet at a record to spur the economy after completing $600 billion of bond purchases this month in a second round of quantitative easing, or so-called QE2. The U.S. economy is recovering at a “moderate pace, though somewhat more slowly” than the central bank had expected, Fed Chairman Ben S. Bernanke said yesterday.
Aid Conditions
European finance chiefs will decide on July 3 whether Greece has met conditions for its next aid payment. Antonis Samaras, leader of the opposition in the Greek parliament, said his party will vote against the government’s new austerity measures, contrary to European Union calls for unity, the Financial Times reported, citing an interview.
Gold is up 8.8 percent in 2011 after climbing the past 10 years, the longest run of gains in at least nine decades. Europe’s debt crisis helped bullion reach a record $1,577.57 on May 2. The metal climbed to an all-time high of 965.84 British pounds today.
Marc Faber, publisher of the Gloom, Boom & Doom report, still favors gold and silver and will keep accumulating gold, even as prices of the metals may decline in the next three months, he said in an interview on Bloomberg Television’s “On the Move Asia.”
Silver for immediate delivery fell 0.5 percent to $36.18 an ounce in London. Palladium declined 0.6 percent to $760 an ounce. Platinum was down 0.8 percent at $1,725.30 an ounce after falling to a three-month low of $1,721.30.
To contact the reporters for this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Phoebe Sedgman in Wellington at psedgman2@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter atccarpenter2@bloomberg.net
