Gold prices fall in Asia over long term concerns

Singapore (Jan 7)  Gold prices fell in early Tuesday trading over long-term concerns that the Federal Reserve will continue to scale back monthly bond purchases that have supported the yellow metal since September of 2012.

The prices fell despite a rising physical demand in Asia and a soft U.S. service-sector data that weakened the dollar.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,237.60 a troy ounce during Asian trading on Tuesday, down 0.03%. On Monday gold prices traded in a range between USD1,236.30 a troy ounce and USD1,238.80 a troy ounce.

Futures were likely to find near-term support at USD1,181.90 a troy ounce, the low from Dec. 31, and resistance at USD1,251.40, the high from Dec. 16. The February contract settled 1.09% higher on Thursday to end at USD1,238.60 a troy ounce.

Reports of rising demand for gold bars and jewelry in Asia pressured prices up on Monday, especially among bargain hunters who viewed the yellow metal as an attractive buy.

Gold prices fell about 29% in 2013 amid growing expectations that the Federal Reserve will taper its USD75 billion in bond purchases this year.

Past and present rounds of Fed bond purchases aim to drive recovery by suppressing long-term borrowing costs, weakening the dollar in the process and making gold an attractive hedge.

The dollar took a hit earlier Monday after the Institute of Supply Management said its non-manufacturing purchasing managers' index fell to 53.0 in December from 53.9 in November. Analysts were expecting the index to increase to 54.5.

The new orders index contracted after 52 consecutive months of growth for the first time since July 2009, falling to 49.4. The employment index ticked up to 55.8, indicating growth in employment for the 17th consecutive month and at a faster rate.

The data sparked expectations that the Fed will take its time dismantling bond purchases, and any decision to do so won't herald the arrival of higher interest rates, which would support gold.

Still, gold moved into negative territory amid concerns that economic indicators overall are improving and will continue to prompt the Fed to scale back bond purchases that have supported gold off and on since the 2008 financial crisis.

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