29 Oct 2013
Investors running out of reasons to hold gold despite continuing loose Fed policy
FXstreet.com (London) - Gold has fallen from five-week highs ahead of today’s two-day US Federal Reserve meeting. And despite some recent short-term gains it is set for a long decline.
Gold had received some pick-up on haven demand and dollar weakness, but with equity markets continuing to rally on expectation of continuing cheap money from the Fed, gold is being seen as increasingly unattractive.
Gold has fallen to USD1,343.30/oz from highs at USD1,358.10 yesterday. It is down 0.69 percent so far today.
With US CPI held below 2 percent, the threat of loose monetary policy-induced inflationary pressures steadily subsided, and with it the demand for gold as an inflation hedge.
Gold is set to close the year with its first net loss in 13 years. It has lost 18.89 percent year-to-date and has slumped from September 2011 highs around USD1,884/oz.
The Fed is highly unlikely to make any changes to monetary policy or to its USD85bn-a-month asset purchase programme. Similarly, the subsequent minutes will likely show concern over the fragility of US recovery and the sluggishness of the labour market. The Fed’s March meeting is on the early side of any projections for a tapering of asset purchases, and with the ultra-dovish Janet Yellen taking over as chairman on January 31, tapering could be pushed well into 2014. But despite this, gold is unlikely to get any real support while inflation is kept down and while equity markets give investors such easy cheap money-fuelled returns.
Gold had received some pick-up on haven demand and dollar weakness, but with equity markets continuing to rally on expectation of continuing cheap money from the Fed, gold is being seen as increasingly unattractive.
Gold has fallen to USD1,343.30/oz from highs at USD1,358.10 yesterday. It is down 0.69 percent so far today.
With US CPI held below 2 percent, the threat of loose monetary policy-induced inflationary pressures steadily subsided, and with it the demand for gold as an inflation hedge.
Gold is set to close the year with its first net loss in 13 years. It has lost 18.89 percent year-to-date and has slumped from September 2011 highs around USD1,884/oz.
The Fed is highly unlikely to make any changes to monetary policy or to its USD85bn-a-month asset purchase programme. Similarly, the subsequent minutes will likely show concern over the fragility of US recovery and the sluggishness of the labour market. The Fed’s March meeting is on the early side of any projections for a tapering of asset purchases, and with the ultra-dovish Janet Yellen taking over as chairman on January 31, tapering could be pushed well into 2014. But despite this, gold is unlikely to get any real support while inflation is kept down and while equity markets give investors such easy cheap money-fuelled returns.