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Gold Prices Slip Ahead of Fed’s Decision on Tapering; Silver Prices Also Fall Sharply

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Gold prices hovered near $1,300 an ounce level mark on Wednesday as investors remained in sidelines ahead of the Federal Reserve’s policy rate statement. Silver prices also fell sharply in trading on Wednesday.

At last check, gold futures for December delivery edged down 0.51% to $1,302.70 an ounce while spot gold slipped 0.07% to $1,308.15 an ounce.

SPDR Gold Trust (ETF) (NYSE: GLD) was almost flat at $126.52

The Fed’s two-day Open Market Committee Meeting will conclude at 2:00 p.m. EST, which will be followed by its Chairman, Ben Bernanke’s press conference at 2:30 p.m. EST.

Market Participants are anticipating the Fed to reduce the pace of its bond purchase program (Quantitative easing), although mildly. Speculation is rife that the Fed will initially scale down the $85 billion monthly bond purchase program by $10 billion to $15 billion.

“We expect a cautious statement from the Fed not to shock the market, but gold will nonetheless continue to drop in coming weeks to around $1,250 in October, as financial liquidity starts to be removed,” said Natixis analyst Bernard Dahdah, according to Reuters.

The Fed’s extremely accommodating monetary policy was the main supporting factor behind the metal’s bull runs for last 12 successive years. Lower interest rates encouraged investors to take bets on gold, which is a non-interest bearing asset.

However, lack of inflationary pressure, relatively better global macroeconomic environment and expectation for an end of easy-money policy, have all weighed heavily on the metal prices.

The metal has lost  about 20% since the beginning of the year.

Meanwhile, in Asia, the physical side demand has subsided. Traders, according to Reuters, said that immense volatility in cash gold prices was holding back  dealers/jeweler.

Silver futures plunged 1.35% to $21.49 an ounce.

In late trading, the iShares Silver Trust (ETF) (NYSE: SLV) was down 0.81% to $20.79, and the ProShares Ultra Silver (ETF) (NYSE: AGQ) was down 1.87%.

 








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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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