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Gold Market Awaits Fed Minutes

Release Date: 
Wednesday, February 20, 2013

Gold fell today ahead of Federal Reserve minutes that investors will watch for direction on U.S. monetary policy.  Uncertainty over the outcome led gold to a significant drop of $23.80 at 8:04 a.m. Pacific Time on the New York Spot Market, trading at $1,582.30 per ounce.  Spot silver was $0.82 lower at $28.72 per ounce.  (Click here for the most current spot prices.)

The Fed will release its minutes from  the January policy meeting today. HSBC analysts said the market is awaiting clues on whether the central bank continued its discussion over whether quantitative easing may either slow or stop before the end of 2013.  “Bullion may face further pressure should the Fed reinforce their earlier statement towards quantitative easing, in our view,” HSBC said.

"Any surprise discussion on what an unwinding of quantitative easing could one day look like could lift U.S. yields and the dollar," analysts at ING said in a note.  The euro was lower against the dollar today, pressuring gold. 

The minutes of the Fed’s Dec. 11-12 meeting showed members were divided between a mid- or end-of- year conclusion to fiscal easing programs. The Fed said in a statement after the January meeting that it’s still committed to buying about $85 billion of government and mortgage securities per month.

“Economic problems haven’t gone away and they won’t go away anytime soon,” said Gavid Wendt, director at Mine Life Pty in Sydney. “People are looking for whether the economy is standing on its own two feet, and what is the Fed doing in terms of pulling back.”

(Sources:  “Gold Snaps Five-Day Losing Streak Amid Fed Stimulus Speculation,” Bloomberg, February 20, 2013; “PRECIOUS-Gold drops to six-month low ahead of FOMC minutes,” Reuters, February 20, 2013; “Gold tumbles, losses build moving into U.S. open,” Marketwatch, February 20, 2013)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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