Gold inches lower; Fed expectations lend support
Singapore, December 11, 2012
Gold inched lower on Tuesday but sentiment was underpinned ahead of a US Federal Reserve meeting where policy makers are expected to announce more stimulus measures, a move that would support gold's appeal as a hedge against inflation.
Many economists expect the Fed to announce monthly bond purchases of $45 billion after its meeting on Tuesday and Wednesday. Gold benefits from an easy monetary policy as investors fear that rampant cash printing will damage the value of fiat currencies, prompting them to seek safety in hard assets such as bullion.
Gold has risen more than 9 per cent so far this year amid monetary easing policies by the world's central banks, especially the Fed and European Central Bank.
"People have realised that what the Fed has been doing is damaging to price stability," said Dominic Schnider, an analyst at UBS Wealth Management in Singapore, adding that recent jumps in US gold coins showed investors' worries about the consequences of Fed's unconventional monetary policy.
But Schnider also said he was disappointed at gold's recent performance, as neither the dragging US budget talks nor a relatively soft dollar appeared to inspire gold buying. Bullion posted two straight months of losses in October and November.
The dollar index came off its two-week high hit last week, while the euro steadied despite the political turmoil in Italy.
Spot gold inched down 0.2 per cent to $1,709.04 an ounce by 0301 GMT, after rising to a one-week high of $1,717.20 in the previous session.
US gold was down 0.3 per cent at $1,710.
GOLD ETF HOLDINGS SLIP FROM RECORD HIGH
Holdings of gold-backed exchange-traded funds edged down to 76.177 million ounces on December 9, after hitting consecutive record highs since mid-November despite stagnant prices.
By comparison, investors in US gold futures and options slashed their net length by a quarter in the week ended December 4, data from the US Commodity Futures Trading Commission showed.
Both platinum and palladium hit multi-month highs in the previous session, encouraged by strength in base metals and brightened outlook on the Chinese economy.
The higher prices triggered some profit-taking selling interest, traders said.
"There has been some noticeable interest in physical PGM (platinum group metals) selling," said a Tokyo-based trader, adding that the overall trade flows will slow down towards the end of the year.
Spot platinum edged down 0.3 per cent to $1,614.24, off Monday's high of $1,625, its highest since mid-October.
Spot palladium, which rose to a near three-month high of $702.5 in the previous session, was little changed at $696.70. – Reuters
More INTERNATIONAL NEWS Stories
- China draws red line on North Korea
- Saudi sentences three to death for 2003 bombing
- First bitcoin machine opens in UK
- US sanctions will boomerang, warns Russia
- China plans $50bn bank to fund projects
- Sony to sell Tokyo 'birthplace'
- Obama orders sanctions over Russian moves
- Crimea parliament votes to join Russia
- Arab League to be revamped
- 'Upskirting' is legal: Massachusetts court
- Singapore probes 'unnatural' death of bitcoin trader
- Onus on world powers for Syria war crimes: UN
- US, Russia set for talks on Ukraine crisis
- Brent oil drops below $109
- Services outshine manufacturing, pushing up jobs
- Bitcoin bank shut down after hacker attack
- India to kick off world's biggest poll on April 7
- China signals focus on reforms
- Hundreds ready for bitcoin exchange class action
- Space taxi, Jupiter mission in Obama budget
- Putin: Use of force last resort in Ukraine
- Powers to boost Lebanese military, economy
- Egypt bans Hamas activities in Egypt
- Putin ends army exercise, markets rally
- Russia has violated international law: Obama
- Russian markets hit as Putin tightens grip on Crimea
- Iran nuclear deal 'being implemented as planned'
- Global factory growth stumbles as demand falters
- Obama warns of 'fallout' for Israel if peace effort fails
- Ukraine mobilises after Putin's 'declaration of war'