Gold Drops Second Time in Three Sessions on Fed Stimulus Concern

Apr 07, 2014 2:36 pm ET

April 7 (Bloomberg) -- Gold fell for the second time in three sessions on concern that the Federal Reserve will press ahead with cuts to monetary stimulus, even after the U.S. economy added fewer jobs than economists expected last month.

The U.S. central bank will release minutes this week of the Federal Open Market Committee’s March meeting. Fed Chair Janet Yellen said at the time that the central bank may start to raise borrowing costs about six months after ending its asset-purchase program, expected later this year. Gold climbed the most in three weeks on April 4 after the jobs data.

“People are not very sure if last week’s employment numbers will change the Fed’s mind about slowing the pace of stimulus,” Fain Shaffer, the president of Infinity Trading Corp. in Indianapolis, said in a telephone interview. “The minutes will provide more clarity on the interest-rate outlook.”

Gold futures for June delivery lost 0.4 percent to settle at $1,298.30 at 1:54 p.m. on the Comex in New York. Trading was 47 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed.

This year, gold has risen 8 percent, rallying from the biggest annual decline since 1981, on concern that U.S. growth was stalling and as tension between Russia and Ukraine escalated.

Fed Meeting

The metal jumped 70 percent from December 2008 to June 2011 as the central bank pumped more than $2 trillion into the financial system and cut interest rates to a record in a bid to boost the economy.

The Fed, which next meets at the end of the month, cut monthly bond-buying by $10 billion at each of the past three gatherings, leaving purchases at $55 billion.

Holdings in gold-backed exchange-traded products declined 15.3 metric tons last week, the most since December, data compiled by Bloomberg show. Assets fell to 1,750.5 tons, the lowest since March 5.

On the New York Mercantile Exchange, platinum futures for July delivery slipped 1.6 percent to $1,427.80 an ounce, the biggest drop since Jan. 30. Palladium futures for June delivery dropped 2.9 percent, the most since June 26, to $767.65 an ounce. Both metals gained in the previous six sessions.

More than 70,000 members of the Association of Mineworkers and Construction Union have been on strike since Jan. 23 at mines in South Africa, the world’s top platinum producer. The National Union of Metalworkers, South Africa’s largest labor organization, said on April 4 that it’s accepting miners who have started to turn to it as the strike drags on.

Silver futures for May delivery fell 0.2 percent to $19.907 an ounce on the Comex.

--With assistance from Glenys Sim in Singapore.