Gold down for a second day on QE outlook

Gold fell for a second day and is headed for its first back-to-back drop in two weeks as market players became wary ahead of the release of FOMCs July meeting minutes on Wednesday, while Mondays two-month high dampened demand. Platinum and palladium fell and silver tumbled more than 2%.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at $1 361.40 per troy ounce at 8:08 GMT, down 0.31% on the day. Prices held in range between days high and low of $1 369.20 and $1 351.90 an ounce respectively. The precious metal slipped 0.68% on Monday, snapping three days of gains, and extended current weeks decline to little over 1.0%.

Gold prices were pressured this week as market players remained cautious ahead of the upcoming minutes of FOMC’s July meeting which should bring some clarity on Fed’s intentions regarding its monetary easing program. The precious metal has largely been tracking shifting expectations for an earlier-than-expected deceleration of the central bank’s bond purchases, which have been pushing up commodities prices. An exit from Quantitative Easing would deliver a heavy blow to dollar-priced raw materials as it will strengthen the dollar, thus making commodities more expensive for foreign currency holders and limiting their appeal as an alternative investment. At the same time, gold is mainly used as a hedge against inflation, which tends to arise as central banks ease money supply, therefore stimulus tapering would cripple demand for the precious metal.

Guan Bingren, a trader at Shanghai Hedge International Trading Co., said for Bloomberg: “Prices dropped quickly as some investors started to close out positions to reduce risks before the Fed releases its minutes. This is also related to the broad selloff today.”

Gold was supported in the recent weeks as lower prices boosted physical demand. Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, rose on a weekly basis for the first time since December last week. However, holdings fell to 912.32 tons on Monday amid Fed stimulus uncertainty.

Meanwhile, according to World Gold Council data, global bar and coin sales rose by 78% to 507.6 tons in the second quarter compared to a year earlier as demand in India and China, the world’s top two consumers, more than doubled. Jewelry demand increased by 47% to 575.5 tons.

Apart from Wednesdays Fed minutes, market players will also be looking ahead at the upcoming U.S. data to gauge the strength of the U.S. economy. On Wednesday, Existing Home Sales in July are expected to have risen to 5.13 million, up from June’s 5.08 million. On Thursday, last week’s Initial Jobless Claims likely rose by 10 000 to 330 000, while the Markit Flash U.S. Manufacturing PMI for August is projected to have advanced to 54.0 from July’s 53.7. On Friday, July’s New Home Sales are expected to have declined to 0.490 million houses sold, down from 0.497 million in the preceding month.

Elsewhere on the precious metals market, silver, platinum and palladium tracked golds downward momentum. Silver declined more than 2% to trade at $22.683 an ounce at 8:04 GMT, marking a 2.08% fall. Prices held in range between days high at $23.193 and low of $22.295. Platinum October futures traded at $1 505.25 per ounce, down 0.25% on the day and shifted between $1 516.20 and $1 497.15 per ounce. Meanwhile, palladium for delivery in September fell by 0.92% to $746.00 an ounce at 8:06 GMT. Prices held in a range between days high and low of $753.60 and $743.90 respectively.