Bloomberg News

Gold Slumps Most in Four Weeks After Fed Sees No Need for Easing

April 03, 2012

Gold slumped the most in more than four weeks after minutes from the Federal Reserve’s latest policy meeting showed bankers may refrain from announcing further monetary stimulus unless economic growth slows.

The central bank is holding off on increasing monetary accommodation unless the U.S. economic expansion falters or prices rise at a slower rate than its 2 percent target, according to minutes of the March 13 meeting released today. Gold has surged almost 90 percent since the end of 2008 as the Fed held borrowing costs at a record low and bought $2.3 trillion in housing and government debt.

“The Fed clearly expressed reduced interest on asset purchases,” said William O’ Neill, an Upper Saddle River, New Jersey-based partner at Logic Advisors, a commodity consultant. “We saw a knee-jerk reaction in the market after the potential for any kind of monetary-easing lessened.”

Gold for immediate delivery slumped 2 percent to $1,643.93 an ounce at 3:24 p.m. in New York. A close at that level would be the biggest loss since Feb. 29.

“We did not hear any concerns about rising inflation, and that was negative for gold, too,” O’Neill said.

Prices also retreated on concern that physical purchases are declining in India, the world’s biggest buyer.

The All India Gems & Jewellery Trade Federation said that members extended a strike for an 18th day to protest a levy on non-branded gold products. About 90 percent of jewelry stores across India were shut today, said Bachhraj Bamalwa, the federation’s chairman.

“Physical demand isn’t extremely robust, as a lot of people are waiting to see if they can buy at lower prices,” Matthew Zeman, a strategist at Kingsview Financial in Chicago, said in a telephone interview.

On the Comex in New York, gold futures for June delivery fell as much as 2.4 percent in electronic trading, after settling down 0.5 percent to $1,672 at the close of floor trading.

To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Joe Richter in New York at jrichter1@bloomberg.net

To contact the editor responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net


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