Gold Extends Declines on Fed Decision to Refrain From Additional Stimulus

Gold fell for a fourth day, heading for the first quarterly loss in more than three years, after the Federal Reserve failed to announce more stimulus measures.

The Fed said Dec. 13 that the U.S. is maintaining its expansion and refrained from taking new actions to bolster the economy. Gold has dropped 2.8 percent this quarter as the dollar rallied 2.2 percent against a six-currency basket.

“Quantitative easing isn’t in the cards any time soon,” Scott Gardner, the chief investment officer at Verdmont Capital SA in Panama, said in an e-mail. A stronger dollar has also been “negative news” for gold, he said.

Gold futures for February delivery fell 0.6 percent to settle at $1,577.20 an ounce at 1:44 p.m. on the Comex in New York. Prices dropped 7.6 percent in the previous three days. A loss this quarter would be first since the period ended Sept. 30, 2008.

Yesterday, gold closed below its 200-day moving average for the first time in almost three years. The drop means prices may tumble to $1,400 “in a hurry,” according to Dave Lutz, the head of exchange-traded fund trading and strategy at Stifel Nicolaus & Co. in Baltimore.

The metal is still up 78 percent since the end of 2008 as the Fed kept U.S. borrowing costs at a record low and made debt purchases to spur growth. Prices have climbed 11 percent in 2011, heading for an 11th straight annual gain, as investors sought a haven amid prospects of stagnating global growth.

Record ETP Holdings

Holdings in bullion-backed exchange-traded products rose to an all-time high of 2,360.81 metric tons yesterday, according to data tracked by Bloomberg News.

“Over the course of the last three days, there’s been a shift to people raising cash and selling gold,” Fred Schoenstein, a trader at Heraeus Precious Metals Management in New York, said in a telephone interview. “The economic outlook hasn’t changed, and the euro situation has only gotten worse. The outlook remains relatively bullish for gold.”

Silver futures for March delivery rose 1.2 percent to $29.274 an ounce on the Comex.

Platinum futures for January delivery dropped 1.4 percent to $1,407 an ounce on the New York Mercantile Exchange. Also on the Nymex, palladium futures for March delivery gained 0.2 percent to $620.65 an ounce.

To contact the reporters on this story: Joe Richter in New York at jrichter1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.