Gold price slips as traders weigh outlook for Fed interest rate cuts
Bullion traded near $2,626 an ounce in thin trading after closing 1.1% higher on Friday.
Spot gold dropped $105 an ounce, or 5.66%, to $1,753.20 an ounce on the Comex division of the New York Mercantile Exchange in early afternoon trade on Wednesday, as investors booked profits and over disappointment about the precious metal’s failure to breach $1,900.
Losses over two trading days now top $120 – gold last hit a settlement record on Monday, when it finished at $1,891.90 an ounce. Gold has gained almost 25% from lows in early July and many analysts are holding to forecasts of $2,000 an ounce in the near term, but some producers have sounded caution.
Gold’s allure as an inflation hedge also remain intact with renewed talk about possible policy-easing initiatives at an annual gathering of central bankers on Friday. A round of asset purchases by the US Fed that eventually became known as “QE2” were unveiled at the meeting last year.
MarketWatch quotes one trader as saying prices could fall another $100 or $200, but in the long term the outlook remains rosy: “Fiscal irresponsibility is here to stay and inflation concerns have been creeping up.”
Bloomberg quotes an investment manager: “A lot of traders and investors who are long-term bullish on gold sold out hoping for a correction because of how much it went up. The toughest thing to do is stay invested during the various parabolas and sit through the corrections.”
Marketwatch ranks gold’s ten worst days of trading – including a 7.30% plunge in 2006 and a pullback similar to today’s last year – in a blog post.
MINING.com reported on Sunday while there is disagreement over the near term direction of the gold price, a former and the current chief of Goldcorp, the world’s number two gold miner, almost agree on its longer term prospects.
