Stock Market Watch

Gold Prices Settle Lower

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Gold prices ended marginally lower on Wednesday, gaining some lost ground after a sharp retreat as the FOMC stopped short of providing further monetary stimulus.  However, strong gains in equities and expectations that Federal Reserve could intervene through its bond purchase program, should the economy deteriorates might attract investors to buy the metal.

Gold for June delivery fell $1.50, or 0.1%, to close at $1,642.30 an ounce on the Comex division of the New York Mercantile Exchange.


Yesterday gold prices hovered around the $1,625 an ounce level, after the end of FOMC-but quickly pared some loses few minutes before settlement. For last couple weeks, the bullion has been range-bound, failing to rise above $1,650 an ounce level and finding support at $1,600 an ounce.

Since February-when gold hit record high of $1,790 an ounce on expectations of further monetary stimulus-  gold prices have lost around $150 an ounce as Fed’s less dovish stance on quantitative easing weighed on the metal.

Reacting to Fed’s decision, Bill O’Neill, a principal with Logic Advisors in New Jersey, said, “The [Fed] statement clearly took QE3 off the table for an extended period.” He believes that Fed’s policy statement was the main reason behind the sell-off.

Notwithstanding Fed’s meeting on interest rates offered few surprises, there’s ample reason for gold investors to remain upbeat on the metal. Market participants can take some heart from the fact that Fed’s Chairman Ben Bernanke said that although U.S. monetary policy was “more or less in the right place” , the central bank would not hesitate to launch another round of bond purchases if the economy were to weaken.

Commenting over Gold’s short to midterm prices, Lynette Tan, an analyst with Phillip Futures, said to CNBC, much would depend upon the external factors.  “I think going forward; gold will probably trade in the direction of where the macro-economy is going. If we hear fresh news from the euro zone that the debt crisis is reemerging, then we could see some safe have demand.”

Gold investors will also closely follow efforts by Europe to solve the debt crisis after European Central Bank President Mario Draghi called for a “growth compact” although he did put the onus on individual governments to shape-up their economies.

Last year, bullion rallied –hitting a record high of around $1,920 last September– on concerns over the euro debt crisis could stall global growth.

On gold’s price range, Tan said, “I am still looking at gold to trade in a range of $1,600 to $1,660. For Q2, I am not looking at gold to make large price moves. Recently, physical demand for gold has fallen, especially in India, which means gold will lack the physical support that it needs to move prices higher.”

Subdued Physical Gold Demand

Meanwhile, in India—world’s biggest consumer of gold– the demand for physical gold is estimated to be fallen by 10 tons in 2012. Higher price of gold, inflation and weakening Indian rupee are said to have curtailed the demand for the metal. Earlier, it was expected that wedding season in India along with Hindu gold buying festival would push up the metal’s demand.

The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.20% higher at $159.62.

Among other precious metals markets, silver for May delivery lost 39 cents, or 1.3%, to close at $30.36 per ounce.

May copper futures gained 3 cents, or 0.8%, to end at $3.70 per pound, keeping steady after the Fed.

Platinum for July delivery closed 80 cents lower, or 0.1%, at $1,547.30 an ounce, while its sister metal palladium for June delivery edged lower $10.70, or 1.6%, at $655.10 an ounce.

 

 

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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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