Gold futures fell the most in three weeks on speculation that the Federal Reserve will further curb monetary stimulus as the U.S. economy recovers, crimping demand for the metal as an alternative investment.
Policy makers trimmed bond purchases for the fourth consecutive meeting last week. “Sufficient underlying strength” made the reductions “appropriate,” Fed Chair Janet Yellen said today at a hearing of the congressional Joint Economic Committee. Bullion slumped 28 percent last year on concern the central bank would slow the pace of bond buying.
“The message today the gold traders heard was that tapering will continue,” Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “The Ukraine crisis provided some support, but the overall sentiment remains subdued.”
Gold futures for June delivery fell 1.5 percent to $1,289.10 an ounce at 12:55 p.m. on the Comex in New York. A close at that price would mark the biggest decline since April 15. Trading was 40 percent above the average for the past 100 days for this time, data compiled by Bloomberg showed.
Prices will have a “slow grind” down and reach $1,050 by year-end as the U.S. economy strengthens, Goldman Sachs Group Inc. wrote in a report on May 5.
Gold jumped 70 percent from December 2008 to June 2011 as the Fed bought debt and cut interest rates to a record in a bid to boost the economy.
Through yesterday, the price advanced 8.8 percent this year, partly as escalating turmoil in Ukraine boosted demand for a haven.
Silver futures for July delivery fell 1.4 percent to $19.37 an ounce on the Comex, the first drop in four sessions.
On the New York Mercantile Exchange, platinum futures for July delivery declined 1.6 percent to $1,434.50 an ounce, heading for the biggest loss for a most-active contract since April 21.
Palladium futures for June delivery slumped 2.4 percent to $798.40 an ounce, the most since April 21. Yesterday, prices jumped to $822, the highest since August 2011, amid supply concerns in Russia and South Africa, the main producers.