Anticipations for additional tapering prompted gold futures to lose value on Wednesday as the yellowish metal dropped to its lowest value in about one week as silver futures also slumped, according to Bloomberg.
Policy makers with the U.S. Federal Reserve are slated to meet on Wednesday to discuss next steps of the economy-spurring program. The Federal Open Market Committee, the policy-making arm of the body, will announce its results once the meeting adjourns.
Bullion has performed strongly thus far in 2014 after having endured its first year of annual losses in 12 years last year. The precious metal and the U.S. dollar typically perform the inverse of one another and additional tapering would strengthen the dollar, thus dragging down the price of gold.
"Macro data coming out of the U.S. seems to have strengthened a touch over the last few days," states a Tuesday report authored by analyst Edward Meir with INTL FCStone Inc. in New York, according to Bloomberg. "Investors will be preoccupied with the Fed's policy statement."
At 9:41 a.m. on Wednesday, gold futures dropped 0.9 percent, a $12.18 loss to $1,343.60 per troy ounce. At 10:06 a.m., silver futures dipped 0.81 percent, a 17-cent fall to $20.66 per troy ounce.
Strong performance thus far in 2014
Thus far this year, gold futures are up about 12 percent. But this week's performance hasn't been so strong. The precious metal is nearing its longest bearish trend since January, which is likely given the FOMC's proclivity to move forward with additional tapering.
During the two previous FOMC meetings, the body opted to slash stimulus by $10 billion at both meetings. A survey conducted by the news source indicated the Fed will announce that it is reducing stimulus by an additional $10 billion on Wednesday.
Finally, when the Fed convenes two days of meetings at the end of October, the body will announce the stimulus program has closed, the survey found.
Reuters reports this round of policy meetings will be the first over which new Fed chief Janet Yellen is presiding. Approved by the U.S. Senate last month, Yellen fills the vacancy created by Ben S. Bernanke fulfilling his tenure.
Chinese economic struggles, Russian overture in Crimea
An additional factor that is impacting the price of gold include the ongoing conflict between Russia and western powers that take exception to Russia's acts regarding Crimea. After Ukraine ousted its leader last month, Crimea voted in a referendum this past weekend to secede from Ukraine. Russia President Vladimir Putin recognized that secession earlier this week.
China, host of the world's second-largest economy, is facing struggles this year with economic growth and development. The Asian nation might not meet the 7.5 percent growth forecast for this year.
But, nonetheless, gold futures are more strongly impacted by the central bank of the U.S., one analyst told Reuters.
"Whatever happens in the world, whether it's the Crimean crisis or China's bond default, they are temporary safe-haven hedges," investment analyst Joyce Liu with Phillip Futures in Singapore told the wire service. "Ultimately, the gold market will still revert to the U.S. economy. Investment demand in gold is highly driven by the state of the economy in the U.S."
Losses come after five days of gains
MarketWatch reports the precious metal's losses on Monday put the kibosh on a five-day bullish streak.
Investors increasingly diverted their business interest toward equities earlier this week, which started the down dip of bullion.
Yet as the week proceeded, the attention span of market players was increasingly training their attention toward the Wednesday afternoon Yellen commentary.
"Investors will be looking at every word for guidance on how recent global events and bad winter weather might impact the economy and the Fed's potential response," managing director and senior financial advisor Richard Gotterer with Wescott Financial Advisory Group told MarketWatch on Tuesday.
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