Gold declined for the fifth time in six sessions as a government report showed the cost of living in the U.S. rose less than forecast, crimping the appeal of the precious metal as a hedge against inflation.
The consumer-price index rose 0.1 percent in August from July, the Labor Department said today. The median forecast in a Bloomberg survey called for a 0.2 percent gain. Federal Reserve officials meet today and tomorrow, when policy makers are forecast to cut monthly bond buying by $10 billion to $75 billion, according to a Bloomberg survey. Gold has fallen 22 percent this year as bets that the Fed will slow stimulus curbed demand.
“With less-than-expected growth in CPI numbers, the appeal of gold as an inflation hedge is diminished,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. “Tomorrow’s extent of reduction in the stimulus will be very crucial for gold prices.”
Gold futures for December delivery slipped 0.6 percent to settle at $1,309.40 at 1:40 p.m. on the Comex in New York. Yesterday, the precious metal slumped to $1,302.70, the lowest since Aug. 8.
Bullion is headed for the largest annual decline since 1981 as some investors lost faith in the metal amid an equity rally and low inflation.
“Our U.S. economists’ expectations for a ‘dovish’ taper and gold’s recent decline will likely limit the downside,” Damien Courvalin and Jeffrey Currie, analysts at Goldman Sachs Group Inc., said in a report dated yesterday. “A more hawkish taper than we currently expect would likely precipitate a decline in gold prices.”
Gold will resume its drop heading into 2014 on expectations that economic data will confirm acceleration in U.S. growth and require a less accommodative monetary policy, according to Goldman, which maintained its forecast for prices to reach $1,050 at the end of next year.
Silver futures for December delivery slipped 1 percent to $21.784 an ounce in New York.
On the New York Mercantile Exchange, platinum futures for October delivery fell 1.3 percent to $1,422.40 an ounce.
Palladium futures for December delivery rose 0.1 percent to $706.95 an ounce, the fourth straight gain and the longest rally since Aug. 16.
Trading was 48 percent lower than the average in the past 100 days for this time of day, according to data compiled by Bloomberg.