Gold Prices Slump as Fed Considers Scaling Back

NEW YORK ( TheStreet) -- Gold prices were falling on Wednesday after the Federal Reserve's minutes from its most recent meeting revealed that "many" central bank members are open to scaling back monetary stimulus soon.

Gold for April delivery at the COMEX division of the CME was dropping $17.30 to $1,569.40 an ounce. The gold price traded as high as $1,588.50 and as low as $1,568 an ounce, while the spot price was dropping $15.70, according to Kitco's gold index.

The minutes of the March 19 and 20 meeting showed that many participants view the gradual strengthening in the U.S. labor market combined with an improving outlook on the sector as evidence that the central bank should reduce its purchases of mortgage-backed securities and longer-term Treasuries.

Other factors were battering the price of the yellow metal before the Fed unexpectedly released its minutes five hours early.

"Now I've seen four majors banks lower price expectations; I've seen an unbelievable strong stock market; I see the public not buying, but selling gold in a place like Japan where I figured with the stimulus they'd be buying gold. Not good," George Gero, vice president of global futures at RBC Capital Markets, said on the phone from New York.

The four major banks Gero referred to were Societe Generale, UBS, Deutche Bank and Goldman Sachs -- all issued research notes over the past week reducing their price targets on gold.

Goldman Sachs' research note on Wednesday morning recommended a short position on COMEX gold.

"While there are risks for modest near-term upside to gold prices should US growth continue to slow down, we see risks to current prices as skewed to the downside as we move through 2013," the note said.

Goldman forecast a year-end target of $1,450 an ounce and a 2014 target of $1,270 an ounce. The bank attributed these revisions to its economists' projections for acceleration in U.S. economic growth later this year, a decline in ETF level gold holdings and little change of gold prices in response to the Cyprus crisis.

Will Rhind, managing director at ETF Securities U.S., said he was skeptical of recent research that projected a bearish forecast on gold.

If you liked this article you might like

How to Trade Red-Hot Gold While Everyone Obsesses Over Bitcoin

Barrick Gold Glitters Enough to Draw Buyers

Little Reason to Buy, Plenty for Concern

If There's a Rally, It Won't Last Long