Gold steadies after drop, but Fed stimulus concerns stay
SINGAPORE (Aug 14) Gold steadied on Wednesday after dropping more than 1 percent in the previous session, but worries over when the U.S. Federal Reserve would begin tapering its bullion-friendly stimulus continued to drag on prices. The Fed's bond buying is tantamount to printing money and a pull back in the scheme would hurt gold's appeal as a hedge against inflation. Uncertainty over the timing of the roll back has already pushed the metal down 21 percent this year, after 12 annual gains. "What would be extremely welcome is some clarity," said analyst Dominic Schnider of UBS Wealth Management in Singapore. "And I think September would be the ideal time to provide clarity. Some market expectations are shifting towards a December tapering," he added. The U.S. economic performance remains too mixed for Fed policymakers to lay out a detailed path for reducing and eventually halting their asset-purchasing next month, Atlanta Fed President Dennis Lockhart said on Tuesday. Spot gold inched down 0.1 percent to $1,319.31 an ounce by 0703 GMT, after a sharp 1 percent drop in the previous session that ended a four-day winning streak. Tuesday's drop was caused by strong U.S. economic data and further import curbs by key buyer India. U.S. retail sales rose in July, data showed on Tuesday, pointing to an acceleration in consumer spending that could bolster the case for a Fed tapering. The next Fed meeting is scheduled for Sept. 17-18. Until then, markets will scrutinise data to gauge the strength of economic recovery. "Once the taper is out, it will hit gold once more", though likely not to the same extent as drops earlier this year, Schnider said.
INDIA CURBS India hiked the import duty on gold yet again to a record 10 percent and raised excise duty on the metal, as imports jumped in July despite the government's attempts to strangle supply and curb demand to rein in dollar spending. Gold prices in India are likely to rise this week, extending gains past their four-month high, due to the import duty hike. "Despite the expectations that gold imports may fall, India's appetite for bullion is anticipated to pick-up later in the year due to seasonal demand," HSBC analysts wrote in a note. Analysts say this could increase further illegal gold supply into India.
Precious metals prices 0703 GMT
Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1319.31 -1.38 -0.10 -21.21 Spot Silver 21.30 -0.11 -0.51 -29.66 Spot Platinum 1484.25 -13.25 -0.88 -3.31 Spot Palladium 732.50 -4.00 -0.54 5.85 COMEX GOLD DEC3 1318.90 -1.60 -0.12 -21.30 21895 COMEX SILVER SEP3 21.31 -0.04 -0.18 -29.70 7465 Euro/Dollar 1.3258 Dollar/Yen 98.34
COMEX gold and silver contracts show the most active months.
