Gold dips but remains on track for strong weekly gain
SINGAPORE (July 12) Gold eased on Friday after four days of gains but was still on track for its biggest weekly gain in nearly two years, on easing fear of an early end to US monetary stimulus that has boosted bullion’s appeal as a hedge against inflation.
Bullion has lost nearly a quarter of its value this year on concern about an early tapering of the US Federal Reserve’s $85bn monthly bond purchases. Fed chairman Ben Bernanke confirmed the fears in June, saying the rollback could start later in the year.
But Mr Bernanke on Wednesday suggested the bond purchases could last longer. Minutes from a June Fed meeting, also released on Wednesday, showed officials were divided over when to end the stimulus.
"A lot of folks out there had been talking about the Fed buying less bonds starting from this September. That’s why the Fed minutes really caught everyone off guard," said a precious metals trader in Hong Kong, adding that the tapering could now be pushed to next year.
Spot gold fell 0.1% to $1,283.34 an ounce by 4.18am GMT. Bullion has gained about 5% so far this week, on course for its biggest weekly climb since October 2011, when it rose 6.2%.
Comex gold and silver were trading near multiweek highs hit on Thursday.
Gold’s small dip came after China’s finance minister said he expected the country’s economic growth for 2013 to come in at 7%, the official Xinhua news agency reported on Friday. The official growth target for the year is 7.5%.
"China is a concern but right now the market seems to place more weight on the timing of Fed’s QE (quantitative easing) tapering. I think we could challenge that $1,300 mark again tonight," the trader said, referring to quantitative easing.
Spot gold hit a high of $1,298.36 on Thursday — its highest in nearly three weeks. Technical factors suggested gold could face difficulty in crossing the $1,300 level, analysts said.
"Based on a purely technical basis, we view it as more likely for prices to ease," Phillip Futures analysts wrote in a note.
"The resistance at $1,300 is a strong one and prices have already shown great difficulty in breaking through."
Spot gold is expected to retrace to a support of $1,273 per ounce, as it failed to break the $1,302 resistance, Reuters technicals analyst Wang Tao said.
Many still expect gold to end lower this year as investors jump to rallying stocks, dumping holdings in gold-backed exchange traded funds, and physical demand slows.
Investors pulled $998.8m from commodities and precious metals funds, up from withdrawals of $92.6m in the prior week, data from Thomson Reuters’ Lipper service showed on Thursday.
