Gold futures in New York headed for their biggest drop in a week before the Federal Reserve releases minutes from its previous meeting that may signal when U.S. policy makers plan to slow stimulus.
The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major currencies, rose the most in a week, reducing the appeal of bullion as an alternative asset. The Federal Open Market Committee will release the minutes of its July meeting today, reducing the appeal of bullion as an alternative asset. The FOMC will start to taper its bond buying at its September meeting, according to 65 percent of economists surveyed by Bloomberg from Aug. 9-13.
Gold tumbled 18 percent this year through yesterday as some investors lost faith in the metal as a store of value and on speculation that the Fed may cut the $85 billion in monthly asset purchases that helped send bullion on a 12-year bull run through 2012. Gold advanced 16 percent since reaching a 34-month low in June as lower prices boosted demand for jewelry, coins and bars.
“There’s some hesitation in the market ahead of the Fed minutes,” David Meger, the director of metal trading at Vision Financial Markets in Chicago, said in a telephone interview. “The Fed is teetering on the fence between wanting to do some type of tapering and not wanting to upset the apple cart, so it’s not surprising to see consolidation ahead of the news.”
Gold futures for December delivery fell 0.8 percent to $1,362.20 an ounce at 9:38 a.m. on the Comex in New York. Trading was 37 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed.
Gold jumped 70 percent from the end of December 2008 to June 2011 as the central bank bought more than $2 trillion in bonds to bolster the economy.
Exchange-traded product holdings backed by the metal rose 1.5 metric tons to 1,949.2 tons yesterday, data compiled by Bloomberg show. Assets are down 26 percent this year.
Silver futures for December delivery slipped 0.6 percent to $22.99 an ounce in New York.