Gold futures edged higher on Wednesday amid a general consensus that tapering will be pushed out as far as March 2014, while the US dollar's persistent firmness held bigger gains at bay.
by Miroslav Zajac
WBP Online
WBP Online
New York - Gold futures were elevated on Wednesday, trapped in territory below five-week highs as market consensus said that the Federal Reserve (Fed) almost certainly won't taper this year. A firmer greenback, however, held more substantial gains at bay.
Gold contracts for December were traded 0.81% higher at $1,356.50 an ounce on New York's Comex as of the time of writing. Silver futures rose at a faster pace, jumping 2.43% to $23.040 at the same time.
Meanwhile, the US dollar index, measuring the relative strength of the greenback against a basket of its six major counterparts, ticked down marginally 0.09% to 79.539 after it had soared to the highest in almost two weeks. The greenback and gold usually reversely correlate, as the precious metal is seen as one of the best currency-hedges.
Traders consider that the Fed won't scale back its monetary stimulus this year as almost a bullet-proof certainty, given the recent string of somewhat sluggish US macro data as well as the negative impact of the recent partial government shutdown.
Fed policymakers will continue in their two-day Open Market Committee (FOMC) meeting later in the day and are expected to keep the $85-billion monthly asset-buying program unchanged possibly as long as until March 2014, most analysts forecast.
UniCredit outlook
Ironically enough, gold has gained from the recent Washington drama and the dramatically increased political uncertainty in the world's number one economy, especially as the whole debt ceiling issue wasn't properly resolved, but only postponed. It was this political brinkmanship that will probably push the Fed to leave its virtual printing machines untouched for longer than previously expected.
UniCredit Research joined the array of those who don't see tapering happening this year as it said the earliest date for the central bank to make such a move may be probably in March next year, projecting gains for the precious metal in the near-term. "The main reasons for this delay are the persisting political uncertainty due to new fiscal policy deadlines, the knock-on effects of the partial government shutdown, the fight over the debt limit, and the weak job creation over the summer months. This could be positive news for the precious metals markets and trigger a further rise in prices," UniCredit Research said in a note on Wednesday.
"Investor interest has been rising strongly again, as evidenced by the inflows into the global gold exchange traded funds (ETFs). On October 22, 209,000 ounces were purchased - the highest inflow so far this year. We expect a further rise in the price of gold to just shy of USD 1,400 per troy ounce. The price of silver will likely also profit from this and increase to USD 25 per troy ounce," the statement added.
Heading to loss
Still, gold prices have fallen nearly $500 an ounce or almost 20% over the past year, and will most likely book their first yearly loss after 12 consecutive years of gains. The anticipated end of the 'easy money' era together with administrative restrictions on import of physical gold to India have been largely behind the metal's drop.
2013 may thus mark a break in the long surge in the metal as gold prices have roughly tripled in the past ten years.
Gold posted a second weekly gain last week, getting firmer ground on postponed tapering bets as well as a weaker greenback.
Over the last session, the precious metal fell, as the greenback appreciated, traders took profits and a sell-out wave emerged in China following renewed credit crunch fears
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