Gold ETF’s Tumble To Lowest In 5 Years

Gold remains flat as traders prepare for the two day Federal Reserve meeting beginning later today. Most analysts do not believe any surprises are in store but there is always the possibility. Investors are hoping that the decision and statement released just after the conclusion of the meeting on Wednesday will have some language changes taking a move hawkish stance giving clues on the timing of an interest rate increase in early 2015. Gold is trading at 1227.80 easing down a few dollars after ending the week at $1230.00.

The dollar dropped before the Federal Open Market Committee led by Chair Janet Yellen will debate when to start raising interest rates. Futures traders have pushed back their bets on the timing of rate increases, with the odds of it going up by December 2015 at 66 percent, from 85 percent by October next year as recently as last month. The Fed indicated in the September meeting that it planned to end its quantitative-easing programs this month. It has held its key interest rate at zero to 0.25 percent since 2008.

Gold prices dropped as holdings in exchange-traded products backed by the metal dropped to the lowest in more than five years. On Monday gold futures drifted lower for the fifth straight session in anticipation of an end to the US Federal Reserve’s economic stimulus program, slipping back from a six-week high reached a week ago. Most large investors and retail buyers have been selling into the rally and the latest weekly data show holdings of exchange traded funds backed by physical gold falling to the lowest in over five years.

Net sales of 13 tonnes took total holdings to 1,654.2 tonnes; the emptiest vaults have been since September 2009 when gold was trading below $1,000. Gold bullion holdings hit a record 2,632 tonnes or 93 million ounces in December 2012. Lack of interest in precious metals also pushed silver to trade at 17.182 but the low price has attracted buyers looking for a cheap deal. This morning the lower dollar and weak silver prices saw the metal climb 21 points. Platinum fell $2.50 to trade at 1255.55.

Industrial metals remain weak except for copper which added 8 points to climb to 3.068 as Chinese housing prices tumbled for the first time in years, which might help see an increase in building. Copper traded near the highest in almost two weeks as a looming strike at the world’s third-largest mine fueled supply concerns. The metal was little changed in London after rising 0.6 percent yesterday to close at the highest since Oct. 14. Freeport-McMoRan Inc.’s union gave notice yesterday that workers plan a 30-day strike starting Nov. 6 at the Grasberg mine in Indonesia over concern about worker safety.

Aluminum rose 0.8 percent to $1,983 a ton on the LME. Inventories dropped for a 53rd session in a row, the longest stretch of declines since November 2000. Zinc and nickel fell, while lead and tin rose. Nickel has now fallen for 7 weeks straight.