Gold slumped Wednesday in the largest decline since November as details from the US Federal Reserve’s latest policy meeting showed more discussion on throttling back on the central bank’s easy-money policies.
The most actively traded contract, for June delivery, fell $US27.90, or 1.8 per cent, to settle at $US1,558.80 a troy ounce on the Comex division of the New York Mercantile Exchange.
Some Fed policy makers said at the March meeting that the central bank would be able to cut back on its bond-buying program by midyear, according to minutes released Wednesday.
“The Fed is talking about rolling off QE before the end of the year,” said Zachary Oxman, a managing director with brokerage TrendMax, referring to the policy of so-called quantitative easing.
“That’s not supportive for gold. The markets continue to buy into the view that an economic recovery is underway.”
The gold market has been rattled by worries that a steadily growing US economy would spur the Federal Reserve to end its easy-money policies sooner than some had anticipated.
Efforts by the Fed and other central banks to boost the amount of cash in the financial system played a key role in gold’s rise to record highs in recent years, analysts say.
Some investors buy gold as a hedge against the inflation that can follow easy-money policies. Futures had traded at about $US1,579 an ounce ahead of the release of the Fed’s minutes.
Goldman Sachs on Wednesday cut its gold-price forecasts for this year, citing the metal’s failure to rise after events that would typically draw investors to gold.
Renewed euro-zone crisis worries and scattered signs of slowing US growth have been followed by stagnant gold prices, “highlighting how conviction in holding gold is quickly waning,” Goldman analysts Damien Courvalin and Jeffrey Currie wrote.
The analysts recommended that clients bet on lower gold prices, closing the bullish bet Goldman had recommended since October 2010. Goldman trimmed its year-end gold forecast by nine per cent, to $US1,450 a troy ounce. Futures last traded at that price in April 2011.
Many gold-market analysts have grown increasingly cautious toward the metal.Deutsche Bank on Tuesday cut its 2013 gold-price outlook by 11.8 per cent. Credit Suisse trimmed its forecasts last week.
Palladium futures fell to a one-month low, pressured by worries about demand for the metal in cars.
The bulk of global palladium production is used by the auto industry in exhaust filters.
A decline in Indian car sales and worries about Chinese demand helped spur the selloff Wednesday, traders with TD Securities said in a note.
A report Wednesday showed Indian car sales fell in the fiscal year ended March 31 for the first time in a decade.
The most actively traded palladium contract, for June delivery, fell 1.7 per cent to settle at $US720.85 an ounce, the lowest settlement price since March 4.
Settlements (ranges include open-outcry and electronic trading):
London PM Gold Fix: $1,575.00; previous PM $1,577.25
Jun gold $1,558.80, down $27.90; Range $1,556.40-$1,588.50
May silver $27.653, down 22.80 cents; Range $27.445-$27.965
Jul platinum $1,529.80, down $23.30; Range $1,525.00-$1,550.60
Jun palladium $720.85, down $12.15; Range $704.00-$728.20
