Gold fell in New York as prospects that the Federal Reserve will reduce monetary stimulus curbed demand for the metal as a protection of wealth. Silver also slipped and platinum plunged to the lowest since November 2009.
Gold slumped to $1,268.70 an ounce on June 21, the lowest since September 2010, after Fed Chairman Ben S. Bernanke said last week the central bank, which buys $85 billion of Treasury and mortgage debt a month, may trim stimulus this year and end the program in 2014 should the economy continue to improve. Goldman Sachs Group Inc. lowered its year-end price forecasts through 2014.
Bullion has slid 24 percent this year as some investors lose faith in it as a store of value, and as speculation grew that the Fed will taper debt-buying that helped the metal rally for 12 years. Investors are assuming an earlier tapering of quantitative easing and a Fed fund rate increase sooner than Goldman economists expect, analysts Damien Courvalin and Jeffrey Currie wrote in a report dated yesterday.
“The signal from the Fed has knocked the wind out of gold,” Sterling Smith, a Chicago-based commodity futures specialist at Citigroup Inc., said in a telephone interview. “The bearish sentiment has brought about more selling and is inhibiting buyers as they expect more downside.”
Gold futures for August delivery declined 1.2 percent to settle at $1,277.10 at 1:47 p.m. on the Comex in New York.
Gold plunged into a bear market in April, extending the retreat from its all-time high of $1,923.70 in September 2011. Goldman, which cut its 2013 year-end price target to $1,300 from $1,435 and lowered the 2014 prediction to $1,050 from $1,270, expects exchange-traded product holdings to fall about 1 million ounces (31.1 metric tons) a month.
Global holdings in ETPs fell 7.5 tons to 2,098.6 tons on June 21, the lowest since February 2011, data compiled by Bloomberg show.
Silver futures for July delivery dropped 2.3 percent to $19.493 an ounce in New York after falling to $19.31 on June 21, the lowest since August 2010.
The metal will trade at $17.50 in a month, down from a previous forecast of $26, UBS AG wrote today in a report. It sees prices at $20.50 in three months and predicts an average of $25 next year.
On the New York Mercantile Exchange, platinum futures for July delivery slumped 2.9 percent to $1,329.10 an ounce, after dropping to $1,325, the lowest for a most-active contract since November 2009.
Trading volume was more than double the average in the past 100 days for this time of day, according to data compiled by Bloomberg.
The market will remain in surplus for next four years, Avior Research (Pty) said in a report today.
Palladium futures for September delivery fell 2.5 percent to $657.65 an ounce.