Gold unfazed over elections

[] — THE outcome of US mid-term elections didn’t have any direct impact on gold, but it could be positive for the dollar on hopes for more fiscal austerity and reduced government regulation.

Disenchanted US voters swept Democrats from power in the House of Representatives and increased the ranks of Senate Republicans on Tuesday in an election rout that dealt a sharp rebuke to President Barack Obama.

Gold inched down on Wednesday, despite a weaker dollar as investors stayed on the sidelines before an expected US Federal Reserve decision to pump hundreds of billions of dollars into the sluggish economy.

The outcome of the Fed meeting would be bullish for assets such as gold if the central bank commits to buying at least $500bn in Treasuries over five months, as per expectations, but dealers are not ruling out surprises.

“I would say there is a risk of a downside surprise in the event the Fed actually announces they commit to buying less than $500bn, or they commit in a more conditional way upon future economic data,” said a dealer in Singapore.

“It really depends on the magnitude and timing of the purchases. All investors are trading cautiously.”

Gold eased $2.40 to $1,354.60 during early trade, off a two-week high of $1,365.49 hit on Monday. Gold struck a record around $1,387 last month.

US gold futures for December delivery dropped $2.2 to $1,354.7 an ounce, having settled $6.30 higher on Tuesday because of a weaker dollar.

The euro struggled to push higher above $1.4000 against the US dollar, which remained on the backfoot as the Federal Reserve looked set to provide more stimulus to spur a flagging recovery.

A bigger-than-expected stimulus could further weigh on the dollar, while a smaller programme could help the US currency stage a rebound, which could put pressure on bullion.

Weaker gold prices failed to attract interest from jewellers, while sales of scraps from speculators also came to a halt.

“Everybody is waiting. Both sides are quiet. There’s not much going on right now,” said Dick Poon, manager at Heraeus in Hong Kong.