Gold dips on uncertainty ahead of Fed minutes

By Frank Tang and Amanda Cooper

NEW YORK/LONDON (BestGrowthStock) – Gold fell on Tuesday as uncertainty over what the Federal Reserve will do to stimulate economic growth prompted investors to take profits.

Top Fed officials downplayed the need for the U.S. central bank to resume buying government debt again to stimulate the economy, ahead of the minutes of the Fed’s most recent policy meeting which will shed light on the likelihood and scope of renewed quantitative easing measures.

“Gold is cooling off a little bit based on the pullback of the euro, and the fact that there has been noise from Fed officials that we should not assume that there is going to be massive additional quantitative easing,” said Donald Selkin, chief market strategist of National Securities Corp.

Kansas City Federal Reserve President Thomas Hoenig, who all year has steadfastly opposed the Fed’s super-easy monetary policy, fleshed out his stance against further easing on Tuesday, saying it would do little to aid the recovery and could spark inflation.

St. Louis Fed President James Bullard said on Friday the Fed faced a difficult decision at next month’s policy meeting on whether to offer further stimulus to a U.S. economy that is still growing but only slowly.

Spot gold was trading down 0.5 percent at $1,346.50 an ounce at 12:48 p.m. EDT (1648 GMT). U.S. gold futures for December delivery fell $6.90 an ounce to $1,347.50.

Bullion has not set an all-time high in three sessions after an 11-session run in which it hit nine record highs.

Investors took profits on Tuesday after gold rallied to a record $1,364.60 an ounce last week as expectations the Federal Reserve would move toward further quantitative easing to bolster the flagging U.S. economy undermined the dollar.

The dollar rose against the euro and a basket of major currencies on Tuesday, extending the previous session’s gains as investors worried the U.S. currency had fallen too abruptly.(FRX/: )

Analysts said the currency market has already priced in aggressive U.S. monetary easing and that the dollar is likely to rebound if the Fed does not press ahead with such a policy at its November 21 meeting.

“Given that the U.S. dollar has declined 10 percent against the euro since the September lows, one has to wonder how much quantitative easing may already be priced in,” CMC Markets analyst Michael Hewson said in a note.”

GOLDMAN RAISES FORECAST

In spite of Tuesday’s decline, many analysts expect gold could rally further despite interim pullbacks.

Investment bank Goldman Sachs said a period of slowing U.S. growth coupled with a fresh round of quantitative easing had prompted it to raise its 12-month gold forecast to $1,650 an ounce from around $1,365 previously.

Investment interest in gold-backed exchange-traded funds was soft, meanwhile, with holdings of the world’s largest, New York’s SPDR Gold Trust, declining by just under 1 tonne on Monday to 1,287.327 tonnes. (GOL/SPDR: )

The trust’s holdings have dropped nearly 7.5 tonnes so far this month, despite a 2.6 percent rise in gold prices.

“It is remarkable that these outflows have not put that much pressure on gold prices so far,” said Commerzbank in a note. “Physical buying interest in Asia ahead of the major religious festivals is apparently forming a counterweight.”

Silver slipped 0.7 percent to $23.12 an ounce, while platinum eased 0.3 percent at $1,677.50 an ounce.

Palladium fell 1.1 percent to $579.

The platinum-palladium ratio — the number of ounces of palladium needed to buy an ounce of platinum — fell to its lowest level since early 2004 this week at just under 2.9.

(Additional reporting by Jan Harvey in London; editing by Jim Marshall)

Gold dips on uncertainty ahead of Fed minutes