Gold Prices Edge Lower, Silver Prices Also Slip

Gold prices pared early gains to turn lower on Monday as spike in U.S. bond yields suggested that market participants expect the Federal Reserve to soon announce the tapering of the bond purchase program. Silver prices also slipped in trading on Monday.

At last check, U.S. gold futures for December delivery fell 0.42% to $1,365.30 an ounce while spot gold lost 0.78% to $1,365.20 an ounce.

The yields on 10-year treasuries edged up towards on 3% on Monday.

The Federal Reserve’s exceedingly accommodative monetary policy has been the key factor behind bullion’s bull-runs since 2009. Ultra low interest rates and rampant currency printing prompted investors to take safety in inflation hedge bets.

However, tighter monetary policy (should the Fed announces the scaling down of quantitative easing) will spike interest rates which in turn will drift investors away from bullion as it is a non-interest-bearing asset.

Now, bullion investors will shift their focus towards the Fed’s most recent minutes from the open market committee (FOMC). The minutes could offer some clue over when the bank intends to pull back its economic stimulating measures.

“There’s a mystery at the moment, because the bond market clearly believes that the Fed tapering is just about to start,” said Jesper Dannesboe, a senior commodity strategist at Societe Generale in a note to clients, according to Reuters.

Bullion rallied last week, touching its two month high level as some short coverings, weaker U.S. dollar and improved demand from China, all supported the prices.

Silver futures were last down 0.76% to $23.20 an ounce.

In late trading, the iShares Silver Trust (ETF) (NYSE: SLV) was down 0.04%, and the ProShares Ultra Silver (ETF) (NYSE: AGQ) was down 0.34%.

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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.