Gold edges lower after recent gains
Singapore, August 20, 2013
Gold eased on Tuesday but wasn't far from two-month highs hit in the previous session, with investors awaiting minutes from the US central bank's July policy meeting for clues on when it will begin scaling back its commodities-friendly stimulus steps.
The precious metal has risen about 6.5 per cent over the last 10 sessions, also supported by signs of increasing physical demand from China and India, and a possible halt in big outflows from exchange-traded funds (ETFs).
Traders said they expected a further drop in prices as gold losses its momentum that was prompted by technical buying once prices crossed $1,350 last week.
"We need a correction. The rally looks a bit overdone to me," said one Hong Kong-based precious metals trader. "The correlation with the dollar and US yields have not been working at all since last week."
US benchmark bond yields hit a two-year high near 3 per cent on Monday and major US stock indexes fell for a fourth straight session as markets braced for the US Federal Reserve to start withdrawing its $85 billion monthly asset purchases.
The yield on benchmark 10-year Treasury notes is up sharply from 1.60 per cent in early May, before the Fed started signalling its intentions to pare back its quantitative easing if the economy continued to strengthen.
Spot gold shed 0.1 per cent to $1,363.90 an ounce by 0355 GMT.
The Fed, which is due to release the minutes of its July policy meeting on Wednesday, had indicated earlier that it could start tapering the bond purchases if the labour and housing markets continued to recover.
The withdrawal of the stimulus would be big blow to gold which hit an all-time in 2011 on the back of easy money from central banks around the world.
It has lost nearly a fifth of its value this year on stimulus worries and outflows from bullion-backed ETFs.
"Once September rolls around, gold's upside becomes more suspect and we could be in store for a much more concerted decline as we think that the Fed will indeed deliver its first tapering instalment," INTL FCStone analyst Edward Meir said.
Buying from China was quiet today, traders said, as dealers awaited more clarity on the Fed stimulus. Shanghai gold futures fell on Tuesday after a three-session rise.
Indian traders said they will start importing gold again over the next week or so after the central bank clarified a new rule that brought the flow of the precious metal into the world's top gold consumer to a standstill at the end of July.
Data from the US Mint showed that August sales of American Eagle gold bullion coins stood at just 3,000 ounces as of Monday, far lower that the 39,000 ounces for the whole of August last year and the monthly average of almost 100,000 ounces for the first seven months of this year. - 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'