Gold Falls as Fed Offers No New Stimulus
NEW YORK – Gold plunged, heading for the biggest decline this year, on expectations that the Federal Reserve will refrain from taking new action to bolster the economy. Silver slumped the most since December.
The dollar rebounded after Fed Chairman Ben S. Bernanke, in congressional testimony, gave no signal that the central bank is considering additional measures to spur the economy. He said the inflation outlook is “subdued.” The greenback gained as much as 0.5 percent against a basket of competing currencies. Before today, gold prices climbed 14 percent this year, compared with a 10 percent gain in 2011.
“People were expecting that the Fed would loosen policies, even if the perception is that the economy is doing well,” James Dailey, who manages $215 million at TEAM Financial Management LLC in Harrisburg, Pennsylvania, said by telephone. “The investor sentiment changed as the Fed committed to nothing. This is the manic nature of the market.”
Gold futures for April delivery fell 3.3 percent to $1,730 an ounce at 12:14 p.m. on the Comex in New York. A close at that price would mark the biggest drop since Dec. 14.
“The market is very, very disappointed as there is no mention of any additional stimulus,” Fain Shaffer, the president of Infinity Trading Corp. in Medford, Oregon, said in a telephone interview.
The U.S. economy expanded at a 3 percent annual rate in the fourth quarter, more than forecast, as companies rebuilt inventories in anticipation of growing demand. Before today, gold prices gained 2.8 percent this month.
The most widely held options contracts give holders the right to buy at $2,200 by August, exchange data show.
“The market is a bit too long and we should be expecting a correction before going back up,”Afshin Nabavi, a senior vice president at bullion refiner MKS Finance SA in Geneva, said today by telephone.
Silver futures for May delivery slumped 5.1 percent to $35.315 an ounce, heading for the biggest decline since Dec. 14. Earlier, they touched $37.58, the highest price since Sept. 22. The metal gained 12 percent this month through yesterday.
On the New York Mercantile Exchange, platinum and palladium also retreated.
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