Thread: Gold Set for Worst Run Since ’04 as Fed Signals End of Purchases

Gold Set for Worst Run Since ’04 as Fed Signals End of Purchases

By Glenys Sim - Jan 3, 2013 5:43 PM PT

Gold tumbled, poised for the longest run of weekly losses since 2004, as Federal Reserve policy makers said that they’ll probably end asset purchases this year and investors cut holdings by the most since May. Silver slumped to the lowest since August while palladium and platinum dropped.

Spot gold fell as much as 1.1 percent to $1,646.15 an ounce, the lowest since Dec. 21, and was at $1,646.75 at 9:35 a.m. in Singapore. Bullion is 0.5 percent lower this week, set for a sixth weekly drop. Holdings in exchange-traded products, which reached a record 2,632.516 metric tons on Dec. 20, decreased 0.4 percent yesterday, data compiled by Bloomberg showed.

Fed policy makers said that they will probably end their $85 billion monthly bond purchases sometime in 2013, with members divided between a mid- or end-of- year finish, according to the record of the Federal Open Market Committee’s Dec. 11-12 gathering released yesterday. Bullion slipped 5.5 percent in the fourth quarter of last year, the worst showing since 2008, as improving economic data around the world damped speculation that central banks will need to add to stimulus.

“A big part of gold’s bull market has been loose monetary policy and an end to that will hurt the rally,” said Wang Xiaoli, chief investment strategist at CITICS Futures Co., a unit of China’s biggest listed brokerage. “It’s still too soon to call the end because these lower prices may finally attract the physical buyers who have largely been absent.”
Fear Trades

Gold’s relative appeal is likely to diminish as so-called fear trades fade, according to Tom Kendall, head of precious-metals research at Credit Suisse Group AG and the most accurate precious-metals forecaster in the past eight quarters tracked by Bloomberg. Cash bullion advanced 7.1 percent in 2012, capping a 12th annual gain as the Fed announced a third round of so-called quantitative easing, the Bank of Japan expanded asset purchases and China approved additional infrastructure spending.

Gold for February delivery slipped 1.6 percent to $1,647.50 an ounce on the Comex in New York. The Dollar Index rallied to the highest in four weeks, weighing on commodities including oil.

Spot gold dropped 1.4 percent yesterday as the Fed minutes were released. At the December meeting, the FOMC announced Treasury purchases of $45 billion a month in addition to $40 billion a month of mortgage-debt purchases begun in September.

Cash silver fell as much as 2.5 percent to $29.42 an ounce, the lowest price since Aug. 22, and was at $29.47. Assets in exchange-traded products backed by the metal reached an all-time high of 18,956.03 tons on Jan. 2.

Spot platinum slipped 0.8 percent to $1,550.25 an ounce, 1.9 percent higher this week in the best such performance in six weeks. Palladium retreated 0.9 percent to $687.25 an ounce, set for a weekly decline.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net

http://www.bloomberg.com/news/2013-01-04/gold-set-for-worst-run-since-04-as-fed-signals-end-of-purchases.html

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