Morning: Gold Moved Back from Earlier Gains, on Fed Worries

Gold and money

(Reuters) – On Monday, gold fell, moving back from early gains as rising beliefs that the U.S. Federal Reserve would decide to taper its stimulus from this month, hurting gold’s appeal as a hedge against inflation.

The compromise is that the Fed will start to taper its bond purchases, now $85 billion a month, by $10 billion or perhaps $15 billion and will announce the reduction to its quantitative easing (QE) after its September 17-18 meeting.

Spot gold, which shown its sharpest weekly decrease in more than two months last week, had dropped 0.1% to reach $1,324.61 an ounce by 0650 GMT after hitting earlier a high of $1,334.46.

December Comex gold earlier was at $1324.60.

The London A.M. fix is $1,314.75.

News that former Treasury Secretary Lawrence Summers had ceased to head the Fed increased bullion prices momentarily as he is seen as more aggressive than the other main contender Janet Yellen. Markets yet don’t expect this to overturn the near-term tapering process.

Barnabas Gan, an analyst at OCBC Bank in Singapore said “Yellen is perceived to be more dovish than summers,” also added “It seems that there may be more resistance in faster tapering of the QE program if Yellen becomes the chairman,”

Gold has tumbled around 20% this year on fears of the tapering process, after twelve straight annual gains.

On Monday, another reason that helped hurt gold’s safe-haven appeal is the easing geopolitical tensions in Syria.

The United States agreed to stop military action against Syria on a deal with Russia to take away President Bashar al-Assad’s chemical weapons stockpile.

The Commodity Futures Trading Commission in a weekly report showed on Friday, money managers and hedge funds reduced bullish bets in futures and possibilities of the U.S. gold markets for the first time in 5 weeks, pushed by easing tensions on Syria and prospects that the Fed will start to reduce its monetary stimulus.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), holdings declined 0.66% to 911.12 tonnes on Friday, its biggest decline since August 1.