Gold slips in Europe

September 18, 2013

Gold Falls
Gold Falls

Gold eased to around $1,310 an ounce on Tuesday on prospects that the US Federal Reserve will announce a modest reduction in its bond-buying stimulus at its two-day meeting. Markets expect the Fed’s Open Market Committee, which started its meeting on Tuesday, will announce it will begin curbing its $85 billion monthly bond buying by just $10 billion, a smaller reduction than previously anticipated.

Spot gold fell 0.2 percent to $1,311.20 an ounce by 1451 GMT, after falling 1.5 percent in the previous session to a five-week low of $1,303.85. US gold futures for December dropped $6.50 an ounce to $1,311.50. “The market is confused by the fact that the Fed will start reducing its stimulus but will still be dovish because the underlying growth is not strong enough and interest rates could be maintained low until 2016,” BofA Merrill Lynch analyst Michael Widmer said.

“You could potentially have a little bit of rallying if tapering comes in below expectations but in the longer-term you’d sell the rally as the Fed starts tightening its stimulus.” The dollar was lower against a basket of currencies, while share markets were mixed, with European stocks falling and US equities opening higher. Gold has lost 21 percent of its value this year after the Fed signalled it would start reining in QE, which would reduce financial liquidity in the market.

With the Fed looking set to take its first step to wind down its stimulus, investors will also be focusing on the central bank’s guidance on its future policy stance on Wednesday, analysts said. Goldman Sachs said in a note it was neutral on gold in the near term, but expected the metal to make fresh lows in 2014. “Our US economists’ expectations for a ‘dovish’ taper and gold’s recent decline will likely limit the downside to gold prices heading into the September FOMC,” it said.

India doubled its import duty on gold jewellery to 15 percent on Tuesday, setting it higher than the duty on raw gold, which has been hiked three times this year to a record 10 percent. In other precious metals, spot silver rose 0.4 percent to $21.78 an ounce, after dropping by 2.3 percent in the previous session. Spot platinum fell 0.5 percent to $1,427.24 an ounce, while spot palladium gained 0.2 percent to $702.25 an ounce. Courtesy Reuters

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