Gold Falls From Three-Week High As Investors Wait On Fed Outlook

New York (Apr 27)  Gold declined from a three-week high as investors sold the most from bullion-backed funds in a month before the Federal Reserve decides on monetary policy.

Holdings in exchange-traded products backed by the metal fell 4 metric tons, the most since March 26, data compiled by Bloomberg as of Tuesday show. Assets declined the past two days after reaching the highest since March 23.

The Fed will release a policy statement later Wednesday, after data that’s forecast to show the U.S. economy grew at the slowest pace in a year. With recent economic reports coming below forecasts, officials will wait until September to raise interest rates, according to economists surveyed by Bloomberg. Higher borrowing curb gold’s appeal because the metal generally only offers returns through price gains.

“People are keeping a close eye on the FOMC meeting for further guidance on interest rate rises,” Jonathan Butler, a precious metals strategist at Mitsubishi Corp., said by phone from London. “We still expect the Fed to wait until the third quarter, and any delay is a stay of execution for gold.”

Gold for immediate delivery lost 0.5 percent to $1,205.52 an ounce by 10:37 a.m. in London, according to Bloomberg generic pricing. It reached $1,215.16 on Tuesday, the highest since April 7. Futures for June delivery fell 0.7 percent to $1,204.80 on the Comex in New York, with volume 38 percent below the 100-day average for the time of day.

Fed officials have said their decision to raise rates will be data-dependent. Gross domestic product in the U.S. expanded an annualized 1 percent in the first three months of the year, according to economists surveyed by Bloomberg, down from 2.2 percent in the previous quarter.

Silver for immediate delivery fell 1 percent to $16.463 an ounce in London, after the biggest two-day advance since December. Platinum declined 0.5 percent to $1,151.75 an ounce, while palladium retreated 0.5 percent to $773.70 an ounce.

Source: Bloomberg