Gold Extends Decline on Prospects for Further Tapering by Fed

16/04/2014 08:39 AST

Gold retreated for a second day, extending the biggest drop in three weeks, on prospects for further cuts to the Federal Reserve’s stimulus program as the U.S economy shows signs of recovery. Silver fell.

Bullion for immediate delivery lost as much as 0.5 percent to $1,295.88 an ounce and traded $1,296.83 at 9.49 a.m. in Singapore, according to Bloomberg generic pricing. The metal slumped 1.9 percent yesterday, the most since March 24.

Gold ended a 12-year bull run in 2013 on expectations that the Fed would cut stimulus as the largest economy recovered. Fed Chair Janet Yellen is scheduled to address the Economic Club of New York today after data yesterday showed that U.S. consumer prices accelerated in March. Bullion has rebounded 7.9 percent this year as unrest in Ukraine spurred haven demand.

“Gold is driven in turn by U.S. economic data and the situation in Ukraine,” said Zhu Siquan, an analyst at GF Futures Co., a unit of the Guangzhou-based company that bought Natixis Commodity Markets Ltd.

Ukrainian troops retook state buildings from armed pro-Russia activists in the eastern Donetsk region yesterday, escalating the conflict as Russia warned of a civil war. White House spokesman Jay Carney said while the U.S. is considering military assistance to Ukraine, lethal aid isn’t an option.

Bullion tumbled yesterday as the increase in U.S. consumer prices spurred speculation that Fed policymakers would have more leeway to extend cuts to stimulus. The drop also came as the World Gold Council said that as much as 1,000 metric tons of bullion in China may be tied up in financing deals.

Gold for June delivery fell 0.3 percent to $1,296.70 an ounce on the Comex in New York after tumbling the most in 16 weeks yesterday. Holdings in the SPDR Gold Trust, the biggest bullion-backed exchange-traded product, rose yesterday for a second day to 806.82 metric tons, data from the website showed.

Silver for immediate delivery lost 0.8 percent to $19.4622 an ounce, extending losses into a fourth day. Platinum fell 0.4 percent to $1,435.13 an ounce after dropping 1.7 percent yesterday, the most since Jan. 30. Palladium traded 0.4 percent lower at $791.50 an ounce, dropping for a second day.

Bloomberg