Gold tumbles on taper comments

Spot gold has seen its biggest decline this week, after the head of the St Louis Fed says an October taper is a possibility.

The price of gold has slumped 2.6% today, falling to $1330 per troy ounce, on speculation that the Fed could taper at next month’s FOMC meeting.

The surprise decision to maintain stimulus at Wednesday’s meeting caught the market off guard, sending gold soaring yesterday as market participants started to rethink if tapering might now be off the table until the end of the year.

In an interview on Bloomberg Television today, though, President of the Federal Rerve Bank of St Louis James Bullard divulged that the result of Wednesday’s meeting was a ‘borderline decision’ and said a small taper could happen in October.

He was careful to point out that the decision to do so would be contingent on economic data, consistent with the Fed’s guidance since the early summer. The prospect of a reduction in stimulus just around the corner reduces gold’s attraction to investors as a store of value.

Gold has also been pressured by news that Clive Capital, one of the world’s biggest commodity hedge funds, is set to close after struggling to perform for a number of years. This has sparked worries that institutional investors might be compelled to liquidate their positions.

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