By Myra P. Saefong, MarketWatch
TOKYO (MarketWatch) — Gold futures dropped as much as $15 an ounce on Globex by Wednesday afternoon in Tokyo as the U.S. Federal Reserve’s decision to stand pat on interest rates and failure to expand the size of its bond-purchase program dulled investment demand for the precious metal.
News Wednesday that Moody’s Investors Service put Spain’s Aa1 rating on review for a possible downgrade failed to support gold’s price. Read more about Moody’s review of Spain’s rating.
Gold for February delivery touched a low of $1,388.50 an ounce in electronic trading on Globex after ending New York trading with a gain of $6.30 at $1,404.30. See Tuesday’s metals column.
The contract recently traded at $1,390.10 an ounce, down $14.20.
“Markets were expecting Federal Reserve to announce some more bond purchases which did not happen,” said Chintan Karnani, chief analyst at Insignia Consultants in New Delhi. “As a result there was profit taking in gold.” Read about the Fed’s decision.
Meanwhile, rating downgrades of Eurozone member nations have “already been factored in by the markets and are reflected in the current [gold] price,” he said.
“For gold to rise and make new highs, it needs more news,” Karnani said. Still, the overall bullish trend is “intact as long as gold remains over $1,369 for the whole of December.”
At below $1,369, “buy stops will get triggered and gold could see another big wave of selling to $1,327,” he said.
Julian Phillips, editor of GoldForecaster.com, said gold prices are currently consolidating around $1,400.
The consolidation, as well as the fall, in prices is part of a “tightening trading range,” he said.
“We expect this to continue this week, but [gold prices] could fly up at any time,” he said. “Gold is building a base from which to overwhelm the $1,400 level. Once this is established, it will be a new ‘floor’.”
