Gold Futures Extend Losses on Taper Speculation

By HY Markets Forex Blog

Gold futures extended declines seen on Tuesday as speculations on the US central bank’s next move may hurt the commodity market.

Gold futures traded 0.21% lower at $1,239.10 per ounce. The yellow metal is expected to extend declines this year as gains in the stock markets lower the need for the metal, according to Morgan Stanley, which reduced silver prices forecasts for 2014 to $19 and in 2015 to $18.86.

Gold prices are expected to drop to $1,050 in 12 months as the Federal Reserve reduces its monthly bond buying program, according to Goldman Sachs.

The US dollar index, which measures the strength of the currency against six of its major peers; advanced 0.06% higher to 81.150 points at the time of writing.

Gold – Fed Meeting in Spotlight

Members of the Federal Open Market Committee (FOMC) are expected to meet for the next policy meeting scheduled for January 28-29.  In the last fed-meeting, the central bank decided to reduce its monthly bond purchases by $10 billion to $75 billion a month.

Investors are expecting the Federal Reserve to scale-back its monthly bond purchases even further at its next meeting, after the release of the non-farm payrolls data came in lower than expected.

“We’re likely to continue on a path of gradual, measured reductions in the pace of purchases, assuming the economy tracks as we expect it to,” San Francisco Fed President John Williams said in an interview with Wall Street Journal.

Philadelphia’s Federal Reserve (Fed) President Charles Plosser said he recommend the central bank should end its quantitative easing before late 2014. Plosser also said he expects the unemployment rate would reach 6.2% by the end of the year.

“The December employment report has not changed my belief that the economy has already met the criteria of substantial improvement in labor market conditions. So my preference would be that we conclude the purchases sooner [than the end of 2014],” Plosser said.


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