Gold Down, Silver and Copper Up

The metals markets are all abuzz over the Federal Reserve meeting today and tomorrow as traders begin to take positions ahead of tomorrow’s decision. The big question is tapering or not to taper and just how much will the FOMC taper. Gold gave up $6.20 to trade at 1257.30 while silver added 10 cents to reach 19.803. Platinum gained $10.60 to trade at 1421.70 and palladium gained $2.20 to trade at 724.30. Gold is the only precious metal trading in the red.

China’s 2013 gold imports from Hong Kong more than doubled from the previous year to reach a record of more than 1,000 tonnes as a sharp fall in prices led to unprecedented demand as China slowly surpasses India as the world’s largest consumer of the precious metal. Physical buying has been supporting prices after the World Gold Council announced new records in gold sales.  Off late Chinese demand has been supporting prices as China’s net gold imports from Hong Kong rose 24% in December bringing the total purchases for 2013 to a record 1,158 tons.  

Gold is witnessing a decent cut in early trade with prices trading lower by near 0.45% to $1257 per ounce mark. While there are no major cues as far as the commodity is concerned, market is probably building into a hawkish scenario from the FOMC meeting. Traders are speculative whether the Fed would extend its trimming down of bond purchase program by another $10 Bln to $65 Bln in the current meeting or not. Traders feel the recent set of economic cues from the US had not been highly supportive for a highly aggressive policy stance from the Fed. So while the US Central bank is unlikely to hit the block by another round of MBS or Treasury bond cuts, its comments though would be watched carefully. Overall set of markets positivism over the improving labor situation in the US would aid support to the Fed to continue its tightening in coming meetings.

Industrial metals were trading flattish after edging down sharply yesterday, as tight physical supply buffered prices against emerging market turmoil fanned by expectations that the Fed will scale back stimulus this week. Copper gained 10 points to trade at 3.264 on implied demands and a further decline in the US dollar. During the Asian session today, base metals at the LME platform are trading on a mixed note. Coming to the commodity specific cues, traders maintain a negative bias on copper on concerns that the demand from China might slow down on the back of declining factory output. Coming to aluminum we are maintaining a ranged view on the commodity as on one hand the commodity might get support from the record high premiums due to shortage of supplies from the Detroit warehouse amidst abnormally low temperatures in the US. However on the other hand, the commodity might take negative cues from the durable goods orders data excluding transportation which might decline from its previous readings.