Morning: Gold Hitting a 4-Week Low on Investors Distraction

Gold Price

(Reuters) – On Thursday, gold dropped hitting a 4-week low, on declining predictions of an upcoming military action against Syria and indecision over the pace and time at which the U.S. Federal Reserve will begin to taper monetary stimulus.

Diplomatic efforts to place Syria’s chemical weapons under international control strengthened, additionally decreasing gold’s safe-haven appeal.

Quantitative Commodity Research owner Peter Fertig said “The more likely diplomatic solution as opposed to a military strike against Syria is of course reducing the safe-haven appeal of gold and will continue to put pressure on prices in the short term,”

Gold earlier hit its weakest since August 15 at $1,338.29 an ounce and stood at $1,342.56 by 0958 GMT, falling 1.8%. Prices were on the road for their worst weekly loss since the end of June.

December Comex gold earlier was at $1346.50.

The London A.M. fix is $1,340.25.

U.S. gold December futures for delivery fell $21.40 an ounce to reach $1,342.40.

Investors’ attentions are now shifted towards the Fed’s policy meeting on September 17-18. The central bank is anticipated to kick-start stimulus tapering as soon as this month, perhaps activating new selling pressure on gold.

Rhona O’Connell, head of metals research and forecasting at Thomson Reuters GFMS said “Although the Fed tapering has been priced in already by the gold market, that is not to say that you won’t be getting a bit of a wobble as of when it is announced,”

Gold prices have dropped about 19% since the Federal Reserve signaled it would begin reducing stimulus by the end of the year, as this would enhance the dollar and decrease financial liquidity.

The market was now waiting for U.S. weekly jobless claims data announcement at 1230 GMT.

ABN Amro noted “We expect U.S. economic data to come in stronger than expected and to seal the case for a reduction in monetary stimulus by the Fed in September,”

Gold prices were expected to contract further in 2014 due to renewed confidence in a stabilizing global economy, Metals consultancy Thomson Reuters GFMS said.

In Singapore the physical market saw sales of gold scraps from Indonesia, whose rupiah currency has dropped to its weakest since 2009, while main consumer, India, demand was quiet.

India has increased the import duty on gold to a record high of 10% to stop imports of the metal, which supported a push to the country’s current account shortage to an all-time high.