Gold slides 1 pct on hints Fed may taper in October
LONDON (Sept 20) Gold fell more than 1 percent on Friday, paring the rally it made after the Federal Reserve's surprise decision this week to maintain monetary stimulus, after a Fed official hinted tapering may yet be unveiled at the bank's October meeting.
St. Louis Fed President James Bullard said on Friday that the U.S. central bank could still scale back its massive bond buying program when it meets on October 29-30, should data point to a stronger economy.
Gold leapt on Wednesday after the Fed said it would not curb its $85 billion monthly bond-buying programme, which has boosted gold by keeping interest rates low and fuelling concerns over inflation. The metal has struggled to build on those gains, however, and Bullard's comments knocked it sharply lower.
Spot gold was down 0.8 percent at $1,353.21 an ounce at 1323 GMT, having earlier hit a session low at $1,346.09. U.S. gold futures for December delivery were down $15.70 an ounce at $1,353.60.
"Though the Fed didn't deliver the widely expected tapering, investors are convinced that this move is only postponed," Alexander Zumpfe, a trader at Heraeus, said. "That obviously weighs on fresh buying interest."
World stocks retreated on Friday but remained near this week's five-year highs, while bond markets consolidated after the major gains that followed the Fed's decision to keep its stimulus measures unchanged.
The dollar touched a one-week high against the yen after Bullard's comments and as investors unwound some negative trades put on after the Fed announcement, adding pressure to gold.
"Tapering may not have been announced on Wednesday, but it is coming," Societe Generale analyst Robin Bhar said.
"Bond yields will carry on going up, and the opportunity cost of holding gold will continue rising. Equity markets are soaring. Those speculators who are piling into gold ... are losing out on gains in other markets."
ASIAN DEMAND SOFT
Physical buying offered little support to gold, with premiums across major Asian markets falling this week as volatile prices, the Fed meeting and a holiday in China kept buyers at bay. Even a brief dip below $1,300 an ounce failed to attract buyers.
However, a trade ministry source told reporters that India's gold imports are set to resume immediately after a two-month gap, as the government and banks sorted out how new rules on overseas purchases should work at a high-level meeting on Friday.
"Jewellers are still looking into new import regulations (linking refined metals imports to end product exports), and also digesting three import duty hikes this year," VTB Capital said in a note.
"It remains to be seen how Indian demand will fare in the next few weeks, as buyers return for seasonal restocking."
Among other precious metals, silver was down 1.9 percent at $22.57 an ounce, tracking losses in gold.
The world's biggest silver exchange-traded fund reported inflows of nearly 105 tonnes on Thursday, the biggest one-day rise in its holdings since late July.
Spot platinum was down 1.2 percent at $1,442 an ounce, while spot palladium lost 1.4 percent at $721.97 an ounce.
