Gold futures fluctuate on mixed Fed comments, stock rally

Gold swung between gains and losses on Tuesday as investors weighed mixed comments by Fed officials following Janet Yellens dovish statement last week and reduced demand as an alternative investment after yesterdays stock rally. Silver fell to the lowest since August, while platinum and palladium retreated to one-month lows.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in December traded at $1 274.00 per troy ounce at 9:28 GMT, up 0.13% on the day. Prices shifted in a days range between $1 276.00 and $1 270.20 an ounce. The precious metal fell by 1.3% on Monday.

Gold traded sideways following a series of mixed comments by senior Fed officials on Monday. President of the Federal Reserve Bank of New York William Dudley, a supporter of Fed’s quantitative easing program, pointed to improving labor market and stronger-than-expected third quarter growth as signs of optimism for the U.S. economic recovery. He however said the signals arent enough to warrant stimulus reduction yet.

Meanwhile, Philadelphia Fed President Charles Plosser said the central bank needs to set a limit for the program and bring it to an end when the final size is reached. This comes after Fed Vice Chairwoman Janet Yellen pledged last week to maintain the central bank’s current bond purchasing pace, if appointed as Bernanke’s successor.

Yellen said she doesn’t see evidence at this point that the current policy is inflating assets bubbles, further curbing speculations for an earlier-than-expected tapering of the stimulus.

In her prepared comments prior to the hearing, Yellen called last month’s 7.3% unemployment rate too high, noting the economy and labor market were performing short of their potential, while inflation remained well below Fed’s 2% target and provided room for easy money supply.

Gold was further pressured yesterday as global equities hovered near the strongest level since 2008 after rallying 18% this year on prospects for global economic recovery. The Dow Jones Industrial Average jumped for the first time above 16 000, while the Standard & Poor’s 500 Index rose above the 1 800 mark and the Stoxx Europe 600 Index surged to a 5-1/2-year high.

The U.S. dollar index, which measures the greenbacks performance against a basket of six major counterparts, traded at 80.73 at 9:28 GMT, down 0.07% on the day. Prices shifted in a days range between 80.79 and 80.60. The December contract retreated by 0.1% on Monday and extended its weekly decline to 0.2% on Tuesday.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, fell to a 4-1/2-year low of 864.51 tons on Monday after remaining unchanged for three days days at 865.71 tons, data on its web site showed. The metal however drew some support after government data showed the trust’s largest investor, Paulson & Co., kept its 10.23 million shares unchanged in the third quarter from the end of the previous one, after its holdings were cut by half in the three months through June. Assets in the ETF have declined by 36% this year.

Elsewhere on the precious metals market, silver futures for settlement in December fell by 0.10% to $20.337 per troy ounce by 9:24 GMT. The metal plunged to a three-month low of $20.203 an ounce, while days high stood at $20.403 an ounce. Platinum for delivery in January rose by 0.37% to $1 416.20 per troy ounce. The contract fell to a days low of $1 405.65 an ounce, the weakest level since October 17, followed by a rebound to session high of $1 416.40. Palladium December futures traded at $717.60 per troy ounce at 9:26 GMT, up 0.12% on the day. The metal held in range between session high at $718.70 and a one-month low of $713.30 an ounce.