Gold falls most in eight weeks on stimulus outlook, Putin comments

Gold lost further positions on Wednesday as Russian President Vladimir Putin did not rule out approving a military operation against the Syrian regime if Assads guilt for the August 21 chemical attack in the suburbs of Damascus is proven. Putin however said that without a U.N. resolution all military action against Syria are considered as illegal, making it clear that the U.S. will face opposition. Silver, platinum and palladium fell as well.

On the Comex division of the New York Mercantile Exchange, gold futures for December settlement plunged to $1 391.10 an ounce at 15:03 GMT, down 1.48% on the day. Prices fell by 1.86% to a new session low of $1 386.10 per ounce earlier in the day, the biggest drop in eight weeks. Days high remained at $1 415.00. The precious metal rose 1.2% on Tuesday but erased its weekly gains and has retreated 0.3% so far this week.

Gold slid further on Wednesday as Russian President Vladimir Putin said in an interview with AP and Russias First Channel that he would not rule out a Russian approval for a strike against Syria if definitive proof points at Bashar al-Assad carrying out the chemical weapon attack. However, Putin stated Russia is not ready to accept U.S. and European allegations that Assads forces were responsible for the August 21 attack against civilians. He said that is yet not clear whether chemical weapons were used at all or those were simply harmful chemical substances.

Putin stated that attacks against Syria without a resolution by the U.N. Security Council will be considered as illegal. “According to current international law, only the United Nations Security Council can sanction the use of force against a sovereign state. Any other approaches, means, to justify the use of force against an independent and sovereign state, are inadmissible,” he said.

Adam Klopfenstein, a senior market strategist at Archer Financial Services Inc. in Chicago, said for Bloomberg: “Russia’s objections are taking some premium out of gold as it’s becoming increasingly clear that U.S. will face opposition. Also, the tapering worries remain on the timing for the Fed to scale back monetary stimulus.”

Later today in the U.S., the Senate Foreign Relations Committee is scheduled to vote on a resolution that would give Obama a limited window for a military operation in Syria. This would be the first test of congressional support for the presidents request for authorization to intervene in the Syrian civil war. Congress will vote on September 9 when the summer recess ends.

“I believe Congress will approve it,” Obama said at a news conference in Stockholm. This happens after he won support by House Speaker John Boehner and Majority Leader Eric Cantor, which would help him build a case to lawmakers who have questioned his decision to initiate an attack against the Syrian regime.

The yellow metal also remained under pressure as recent upbeat U.S. data bolstered speculation that the Federal Reserve will begin trimming its $85 billion per month bond purchases after FOMCs upcoming meeting on September 17-18, when the committee will reassess its economic recovery outlook. According to 65% of economists in an August 9-13 Bloomberg poll, the central bank will begin tapering its Quantitative Easing program in September with an initial reduction of $10 billion.

Elsewhere on the precious metals market, silver, platinum and palladium also declined. Silver December futures slipped 3.79% to $23.502 an ounce at 14:53 GMT. Prices fell by 4.4% earlier in the day to a low of $23.398 an ounce, the steepest fall since July 5. Platinum for delivery in October traded at $1 500.70 an ounce at 14:54 GMT, marking a 2.44% decline. Futures plunged by 2.87% earlier in the session to a days low of $1 495.30 an ounce, the biggest decline since June 26, while days high stood at $1 539.75 per ounce. Palladium for December settlement traded at $702.60 an ounce at 14:56 GMT, down 2.14%. Futures slid by 2.8% earlier in the day to $698.20 an ounce, marking the steepest fall since October, while days high stood at $720.40 per ounce.