Sept. 16 (Bloomberg) -- Gold swung between gains and losses as the dollar fell to the lowest level in a month after Lawrence Summers withdrew his nomination to lead the Federal Reserve and as the central bank meets this week to discuss stimulus.
Bullion for immediate delivery traded at $1,325.14 an ounce by 3:03 p.m. in Singapore from $1,326.39 on Sept. 13. Earlier, the metal advanced as much as 0.8 percent and declined 0.3 percent. Prices dropped 4.7 percent last week, the biggest decline since the period ended June 28. Gold for December delivery rose 1.1 percent to $1,323.10 an ounce on the Comex in New York, rallying from a 5.6 percent loss last week.
President Barack Obama had mentioned Summers and Fed Vice Chairman Janet Yellen as potential candidates to lead the central bank after Ben S. Bernanke’s term expires Jan. 31. Summers, a former Treasury Secretary, would tighten policy more than Yellen, a Bloomberg Global Poll showed last week. Summers withdrawal is positive for gold in the short-term, said Dominic Schnider at UBS AG’s wealth-management unit in Singapore.
“Long-term, there’s no chance that will change our negative stance on gold,” said Schnider, head of commodities research, in an interview on Bloomberg Television today. “Tapering will come with or without Summers being chairman.”
The Bloomberg Dollar Index, a gauge against 10 major trading partners, fell as much as 0.6 percent today to the lowest since Aug. 12. The index gained 3.2 percent this year while gold tumbled 21 percent as investors lost faith in the metal as a store of value and the U.S. economy improved.
Bullion rose 70 percent from December 2008 to June 2011 as the U.S. central bank pumped more than $2 trillion into the financial system by buying debt. Policy makers will cut monthly purchases by $10 billion at their Sept. 17-18 meeting to $75 billion, an economist survey Sept. 6 showed. The Bloomberg Global Poll, conducted Sept. 10, showed 40 percent of respondents saw Summers getting the Fed job versus 33 percent for Yellen.
“There’s a lot of pressure for continuity,” said David Mann, regional head of research for Asia at Standard Chartered Bank, in an interview on Bloomberg Television. “The recovery is in place, but we’re not roaring away. They’re going to be very careful to deliver policy continuity.”
Gold is set to drop further as the Fed cuts stimulus and the economy improves, according to Goldman Sachs Group Inc., which said Sept. 13 bullion may drop below $1,000.
The Institute for Supply Management’s factory index showed U.S. manufacturing expanded in August at the fastest pace since June 2011. The group’s gauge of service industries, which cover almost 90 percent of the economy, posted the highest reading since December 2005, according to data compiled by Bloomberg.
Fed policy makers were “broadly comfortable” with Bernanke’s plan to start reducing purchases if the economy improves, minutes of their July meeting showed. The Fed has pledged for more than a year to press on with asset purchases until achieving sustainable gains in the labor market.
Silver for immediate delivery declined 1.7 percent to $21.8449 an ounce. Prices slumped 6.9 percent last week, the most since June 21. The metal for December delivery surged as much as 3.6 percent to $22.49 an ounce in New York before trading at $21.86.
Palladium advanced 0.8 percent to $706.05 an ounce while platinum was little changed at $1,453.85 an ounce.
--Editor: Ovais Subhani