Gold futures set for biggest weekly loss since September, Goldman Sachs predicts prices may drop to $1 000

Gold futures traded little changed on Friday, but headed for the largest weekly loss since September after the Federal Reserve signaled interest rates may increase by mid-2015, while further trimming monetary stimulus. Also fanning negative sentiment, Goldman Sachs Group Inc. predicted prices may plunge to $1 000 an ounce. Meanwhile, assets in the SPDR Gold Trust, the biggest bullion-backed ETF, were unchanged yesterday, after retreating from three-month high on March 17.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in April traded at $1 330.30 per troy ounce at 07:56 GMT, down 0.02% on the day. Prices shifted in a tight daily range between $1 335.60 an ounce and $1 329.80 an ounce.

Prices have retreated from a six-month high of $1 392.60 an ounce on March 17 as turmoil over Ukraine left Russia and the West involved in their worst conflict since the end of the Cold War. The precious metal was set to drop 3.7% this week, snapping six weeks of advances, the longest winning run since August 2011 and the largest decline since the week ended September 13.

Jeffrey Currie, Goldman’s head of commodities research, said in a Bloomberg News interview that this month the advances would be brief and there are increasing chances, prices would reach $1,000 for the first time since 2009.

Federal Reserve policy makers trimmed the bond-buying program by another $10 billion to $55 billion per month, yesterday. Moreover, Federal Reserve Chair Janet Yellen, said that the first increase in borrowing costs should come “around six months” after the end of the stimulus program. The monetary easing program is expected to be brought to an end this fall.

“The risk premiums have been taken out of it,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin in Sydney, cited by Bloomberg. “We buy gold as means for a hedge against something, as a store of value. When that evaporates from the market then it really only comes down to the physical buying mentality of people that will put a floor in place.”

Chinese demand

On the Shanghai Gold Exchange, trading volumes for spot bullion of 99.99 percent purity rose to a the strongest level in three weeks on March 19th. The precious metal for immediate delivery traded at a discount to bullion traded in London of $3.85 an ounce.

Higher bullion prices have recently hurt demand in China, which according to data by the World Gold Council, overtook India as the largest global consumer last year, consuming a record 1 066 tons.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, were unchanged at 812.78 tons on Thursday, after retreating from a three month high on March 17. Holdings in the fund are up 0.9% this year after it lost 41% of its assets in 2013 that wiped almost $42 billion in value. A total of 553 tons has been withdrawn last year.