Gold fluctuates in London after surging on Fed stimulus plans

Gold was little changed in London following a 4.1 percent rally Wednesday after the US Federal Reserve unexpectedly refrained from reducing the pace of monthly bond purchases.

Platinum advanced.

The Federal Open Market Committee said it will “await more evidence” for sustained economic recovery before reducing its $85 billion in monthly stimulus, according to a statement Wednesday. Gold slid 19 percent this year on speculation that the Fed  would taper support programmes that helped the precious metal cap a 12-year bull run in 2012. Bullion rallied Wednesday as the Standard & Poor’s 500 Index of equities rose to a record.

“Gold prices joined a broader commodity and equity markets risk-on rally as investors cheered the FOMC’s persistent accommodative stance,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in an e-mailed report. “For the rally to be sustained for a longer period, we would need to see evidence of physical flows entering the market.”

Gold for immediate delivery fell less than 0.1 percent to $1,363.60 an ounce by 11:01 a.m. in London, swinging between gains and losses and leaving this week’s increase at 2.8 percent. Wednesday’s jump was the biggest since June 1, 2012.

Analysts Surprised

Futures for December delivery on the Comex in New York traded at $1,362.20 an ounce, up 4.2 percent from yesterday’s settlement of $1,307.60. The Standard & Poor’s GSCI Spot gauge of 24 commodities rose 0.9 percent today, extending yesterday’s 1.5

percent gain, the biggest in three weeks. The dollar fell to a seven-month low against a basket of 10 currencies today.

Goldman Sachs Group Inc. said the Fed’s decision “leaves risks to gold prices as skewed to the upside in the near-term.” The bank restated its prediction that prices will resume a drop into 2014 on U.S. economic growth and less accommodative monetary policy, analysts Damien Courvalin and Jeffrey Currie wrote in a note dated Wednesday.

Analysts were divided on the amount by which policy makers would scale back monthly asset purchases. Among 64 economists surveyed by Bloomberg News before the announcement, 33 predicted the Fed would reduce buying of Treasuries by $5 billion or less, while 31 forecast a cut of $10 billion or more. The Fed said yesterday that it needs more evidence of lasting improvement in the economy and warned that an increase in interest rates threatens to curb the expansion.