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Gold Prices Hit $1,300 As Investors Eye Fed’s Tapering; Silver Prices Fall Sharply

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Gold prices extended losses during Asian trading hours on Wednesday to touch its five-week low level as investors continued to cut positions on the metal ahead of the conclusion of the Federal Reserve’s two-day open market meeting (FOMC). Silver prices, meanwhile, have fallen sharply in early trading on Wednesday.

At last check, gold futures for December delivery fell 0.73% to $1,299.80 an ounce while spot gold edged down 0.72% to $1,299.56.

Silver futures plunged 1.17% to $21.53 an ounce.

SPDR Gold Trust (ETF) (NYSE: GLD) was down 0.84% in premarket trading $125.44.

Following the conclusion of the FOMC, the Fed’s chairman, Ben Bernanke will share bank’s outlook on the U.S. economy, unemployment level but market participants will be more anxious to know at what pace the Fed will pull-back its economic stimulating measures.

The Fed’s extremely accommodating monetary policy has been the key factor behind gold’s bull runs after the financial crises of 2008/09 until 2012. Record low interest rates and rampant currency printing (quantitative easing) kept interest rates low which in turn prompted investors to look towards non-interest bearing assets such as gold.

However, the U.S. macroeconomic environment has shown significant improvement in 2013, especially the job and housing market. Hence, market participants believe that the tapering of the asset purchases might commence from September.  Several policymakers in the recent past also signaled towards reducing the pace of economic stimulating measures from September.

While the general perception is that the Fed will initially reduce the $85 billion monthly bond purchase program by $10 billion, any bigger amount, say $20 billion, could further hurt bullion prices.

“It’s all dependent now on the FOMC… It depends on what the language is going to be on their stimulus and what sort of tapering they pursue,” said a precious metals trader in Hong Kong, while speaking to Reuters.

 








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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.

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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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