Gold dropped the most in almost two weeks as investors awaited the outcome of the Federal Reserve’s monetary-policy meeting.
The central bank decides whether to add further stimulus when it concludes a two-day meeting on Wednesday. The Fed will expand Operation Twist beyond $400 billion to spur growth and buy protection against a deeper crisis in Europe, according to a Bloomberg News survey of economists. Euro-area leaders at the Group of 20 summit in Mexico yesterday pledged to take “all necessary policy measures” to defend the currency union.
“The Fed meeting seems to have frozen the markets,” Tim Gardiner, a New York-based managing director at TD Securities Inc., wrote in a report. “Volumes are low as expectations are mixed.”
Gold futures for August delivery fell 0.9 percent to $1,608.20 an ounce at 9:29 a.m. on the Comex in New York. A close at that price would make it the sharpest drop for a most- active contract since June 7.
The metal is up 2.5 per cent this year after 11 consecutive annual increases. Bullion surged 70 percent from the end of December 2008 to June 2011 as the Fed kept borrowing costs at a record low and bought $2.3 trillion of debt in two rounds of so- called quantitative easing.
“Investors are exercising caution in case the Fed disappoints,” said Huang Fulong, an analyst at CITICS Futures Co., a unit of China’s biggest listed brokerage. “Gold above $1,600 has easing priced in and may sell off hard if some form of stimulus isn’t taken.”
Silver futures for July delivery slipped 0.7 percent to $28.16 an ounce in New York.