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NEW YORK—Gold futures tumbled as investors continued to shed the precious metal after Tuesday's Federal Reserve statement damped hopes of another round of monetary stimulus.
April-delivery gold fell $51.30, or 3%, to settle at $1,642.90 a troy ounce on the Comex division of the New York Mercantile Exchange. This was the lowest gold settlement price in more than eight weeks.
The contract for March delivery was down $51.20, or 3%, at $1,642.50 an ounce.
Investors have been hoping for months that the Fed would again take action to spur the economy. The central bank's last round of quantitative easing, known as QE2, weakened the U.S. dollar and sent gold prices sharply higher, because the metal is seen as a store of value and a hedge against the falling value of paper currencies.
After the market closed Tuesday, the Fed's upbeat comments about the U.S. labor market dimmed hopes of further stimulus.
"Yet another Fed meeting came and went without the QE3-hopeful commodities-oriented speculative crowd getting its wishes fulfilled by the release of a fresh batch of nearly cost-free money," said Jon Nadler, senior metals analyst with Kitco Metals Inc. North America.
Gold prices may slip to $1,630 an ounce in the near term, Standard Bank's head of commodity strategy Walter de Wet said in a note.
Barclays Capital said that the economy would "either need to suddenly slow or inflation to decline more than the Committee expects before additional asset purchases are initiated," adding that they do not forecast further easing this year.
However, not everyone is convinced the Fed's printing press is getting shut down just yet.
"I still think we're going to get another round of QE," said Francisco Blanch, Bank of America Merrill Lynch's head of commodity research, on Tuesday at the Bloomberg Precious Metals conference. He added that more stimulus is necessary to put the U.S. economy on a firmer footing, and such programs will likely add between $200 and $300 to the price of gold.
Moreover, gold's sharp move lower may spark demand from emerging markets like the world's largest gold consumer India and close second China. Buyers in both countries tend to be price sensitive and gold has only briefly traded below $1,700 during the past six months so lower prices are likely to lure both countries to the market.
Gold "may be nearing price levels that will encourage emerging-market demand, which should help stabilize prices," said HSBC.
