Gold Drops for Second Day as Investors Await Fed Policy Decision

Gold declined for the second straight day as investors awaited a policy statement from the Federal Reserve that may signal whether the central bank will begin trimming its stimulus efforts.

The precious metal climbed 8.3 percent in July through yesterday, set for the biggest gain since January 2012. Fed Chairman Ben S. Bernanke said this month that it’s too early to decide whether to begin scaling back debt purchases in September, after saying on June 19 that bond buying could slow if the economy improves. The U.S. expanded more than projected in the second quarter, the Commerce Department said today.

“The market is going to be very choppy and nervous today,” Michael Smith, the president of T&K Futures & Options in Port St. Lucie, Florida, said in a telephone interview. “The data has got some investors worried that tapering may begin this year.”

Gold futures for December delivery fell 0.6 percent to $1,316.90 an ounce at 10:22 a.m. on the Comex in New York. Prices earlier rose as much as 1.1 percent.

Bullion dropped 21 percent this year through yesterday after some investors lost faith in the metal as a store of value and on speculation the Fed may curb its bond-buying program. The Fed is buying $85 billion of debt a month. While none of the 54 economists surveyed by Bloomberg from July 18 through July 22 expected policy makers to begin paring purchases at this meeting, half predicted a reduction to $65 billion per month in September.

Silver futures for September delivery slid 0.4 percent to $19.61 an ounce in New York.

Source: Bloomberg