Gold dropped for a second day in New York as physical demand slumped due to holidays in Asia and as investors await the outcome of a Federal Reserve meeting.
Economists expect the U.S. central bank will maintain a pledge to keep its benchmark interest rate near zero at its meeting today. European equities declined and commodities were little changed. Financial markets in China, Hong Kong and Taiwan are closed today for the Lunar New Year.
“In the absence of sustained physical interest, gold is prone to a little more downside this week as bullion continues trading with global risk sentiment,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a report. Still, the Fed is “set to remain accommodative for now which is, as ever, gold-beneficial in the long run.”
Gold for February delivery slid $10.80, or 0.6 percent, to $1,653.70 an ounce by 8:04 a.m. on the Comex in New York. Prices dropped 0.8 percent yesterday, the most in a week. Bullion for immediate delivery fell 0.7 percent to $1,653.63 in London.
The metal climbed 10 percent in 2011, an 11th consecutive annual gain, as investors sought to diversify from equities and some currencies. While gold slid 14 percent since touching a record $1,923.70 in September, holdings in bullion-backed exchange-traded products are within 1.9 percent of last month’s all-time high. Assets were 2,349.2 metric tons yesterday, data compiled by Bloomberg show.
Fed Forecasts
The Fed said last week it will provide two charts with the forecasts for the benchmark rate after the meeting of policy makers. It left the target for overnight loans between banks in a range of zero to 0.25 percent last month and reiterated that economic conditions may warrant “exceptionally low” rates “at least” through mid-2013. They will keep the key rate unchanged today, according to a Bloomberg survey.
“It’s all about the dollar,” said Nick Trevethan, an analyst at Australia & New Zealand Banking Group Ltd. “This is the first time the Federal Open Market Committee is giving its forecast, and I think people are keen to see what it looks like.”
Silver for March delivery in New York dropped 0.8 percent to $31.71 an ounce. It’s the best-performing precious metal this year with a gain of 14 percent.
Palladium for March delivery fell 1 percent to $673.50 an ounce after rising to a six-week high of $690 yesterday. Platinum for April delivery was down 0.4 percent at $1,545.50 an ounce. It yesterday climbed to $1,572, the highest price since Dec. 2.
