Gold Drops on Bernanke Testimony After Wide Price Swings
Gold futures closed lower following wide prices swings as Federal Reserve Chairman Ben S. Bernanke signaled that U.S. monetary stimulus may be scaled back.
“If we see continued improvement, and we have confidence that is going to be sustained, we could in the next few meetings take a step down in our pace of purchases,” Bernanke said today in Washington in congressional testimony. Gold jumped as much as 2.6 percent to $1,413.30 an ounce after he said that withdrawing policy accommodation “at this juncture” would be “highly unlikely.”
“The market realizes that the Fed is working on a plan to end the stimulus,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “The buyers are deserting the gold market as the stimulus support may disappear.”
Gold futures for June delivery dropped 0.7 percent to close at $1,367.40 an ounce at 1:44 p.m. on the Comex in New York. The price fell as low as $1,353.10 after the settlement.
Trading almost doubled from the average in the past 100 days for this time, according to data compiled by Bloomberg.
Silver futures for July delivery rose 0.1 percent to $22.472 an ounce on the Comex. The metal jumped as much as 3.7 percent and dropped 1.3 percent.
Two days ago, silver plunged as much as 9.4 percent and gained 4 percent before closing up 1 percent after Moody’s Investors Service said U.S. policy makers must address debt woes to avoid a credit-rating downgrade this year.
In 2013, silver has tumbled 26 percent, the most among 24 raw materials in the Standard & Poor’s GSCI Spot Index, followed by gold.
The Fed buys $85 billion of Treasury and mortgage debt a month. Gold fell into a bear market in April as some investors lost faith in the metal as a store of value, partly on concern that the Fed may scale back stimulus. The price has tumbled 18 percent this year.
After the settlement, Fed minutes from the last meeting showed that many officials said more progress in the labor market is needed before deciding to slow the pace of asset purchases.
On the New York Mercantile Exchange, palladium futures for June delivery rose 0.5 percent to $752.15 an ounce, the highest settlement since April 3.
Platinum futures for July delivery gained 0.7 percent to $1,469.20 an ounce.
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