Gold cuts losses, still pressured by Fed concerns
NEW YORK ( Aug 7) Gold partially recovered from a three-week low hit on Wednesday, but remained under pressure on prospect that the U.S. Federal Reserve could start to rein in its stimulus programme as soon as next month.
Bullion has lost around 25 percent of its value this year, after 12 annual gains, on fears the Fed will curb its $85 billion monthly bond purchases on signs of economic recovery.
The U.S. central bank's tapering would support a higher interest rate environment that diminishes gold's attractiveness.
Spot gold was up 0.1 percent at $1,283.01 an ounce by 1400 GMT, having hit its lowest level since July 17 at $1,272.64 earlier in the session.
U.S. gold futures for December fell $0.50 to $1,282.30 an ounce.
Traders said there was some buying of the precious metal from those who had agreed to sell at future dates.
"Probably the market was a little bit too short and now it is covering positions... moves are also exacerbated by lack of liquidity as many (players) are on holiday," Deutsche Bank trader Michael Blumenroth said.
"We don't expect big positioning until we get more economic data and of course the U.S. Fed meeting in mid-September, which should provide more direction," he said, adding "We are seeing the next support at $1,270-$1,280."
The dollar stood around a one-week low hit earlier, while European and U.S. shares fell.
Benchmark U.S. Treasury yields edged slightly lower to 2.62 percent. Returns from U.S. bonds are closely watched by the gold market, given that the metal pays no interest, as these are viewed as a key indicator of what the Fed action will be in September, analysts said.
Chicago Fed President Charles Evans said on Tuesday the U.S. central bank will probably trim its quantitative easing (QE) programme later this year and could do so as early as September, depending on economic data.
Evans was the third Fed official in two days to suggest a September pullback remained on the table.
Fed policymakers, who last week voted to continue its bond-buying, next meet on Sept. 17 and 18 to discuss policy.
PHYSICAL DEMAND SLOWS
With physical demand subdued during the seasonally soft summer period, investors are closely monitoring economic data from the United States and wider economic events.
The U.S. economy likely grew faster than initially reported in the second quarter, thanks to a sharp narrowing in the trade deficit to its lowest in more than 3-1/2 years in June as exports touched a record high and imports fell.
Shanghai gold futures closed down 1.5 percent on lower demand, dealers said.
China's net gold imports from key supplier Hong Kong slipped about 4 percent in June from the previous month, although purchases held above 100 tonnes.
Gold premiums in India eased due to a lack of buying support in the physical market, as traders survived on old stocks amid an absence of fresh imports.
Silver was down 0.4 percent at $19.41 an ounce. Platinum fell 0.1 percent to $1,423.49 an ounce and palladium lost 0.5 percent to $716.72 an ounce, having touched a near one-month low of $709.72.
