By Reuters from http://economictimes.indiatimes.com/
SINGAPORE: Gold struggled to move higher in thin trade on Tuesday as investors waited for a US Federal Reserve meeting to shed some light on the central bank's monetary policy amid caution over a resurfacing crisis in Europe.
The two-day Federal Open Market Committee meeting is scheduled to kick off later in the day. Though the Fed is expected to adopt a wait-and-see approach, its comments will be put under scrutiny as investors seek clues on possible quantitative easing measures.
"If the Fed fails to hint at more quantitative easing, we may see a sharp drop in gold prices," said Hou Xinqiang, an analyst at Jinrui Futures in the southern Chinese city of Shenzhen.
Gold hovered near $US1640 an ounce on Monday after data showed stabilizing factory activities in China, while investors focused on a US Federal Reserve policy meeting later in the week to gauge the health of the world's largest economy.
Gold fell 1 per cent last week, in tandem with equities and other commodities, as resurfaced fear about Spain's debt crisis raised concerns about global economic growth and dented risk appetite.
China's factories stabilised in April as output ticked higher, new business rose from multi-month lows and export orders perked up, the HSBC Flash Purchasing Managers Index said, in line with expectations.
"Gold doesn't seem to be trading on anything other than externally derived sentiment," said Nick Trevethan, senior commodity strategist at ANZ in Singapore.
Comex gold remains within its recent sideways consolidation range although it is getting modest support from the softer U.S. dollar, says Charles Nedoss, senior market strategist with Olympus Futures. As of mid-morning Friday, the June futures have been confined to a band of $1,631.20 to $1,659.60 so far this week. The contract was up $4.20 for the day to $1,645.60 an ounce. The dollar index is having trouble breaking back above its 10-day moving average and was down 0.432 point to 79.275 as of 10:25 a.m. EDT. A weaker greenback often encourages buying of gold as a currency hedge. “I think if the (gold) charts looked a little better, you’d see a lot better rally,” Nedoss says. “I think you still have people licking their wounds here.” Some “bottom fishing” is taking place after recent declines, Nedoss says. “But I don’t think you’re seeing any big buying coming in,” he says.
Speculation around the health of the US economy is behind much of the recent weakness in gold prices but, according to Joe Mazumdar of Haywood Securities, there are also a number of other factors at play.
Mazumdar says that although the fundamentals remain sound, central banks are still buying gold, inflation within emerging markets continues to ebb and flow and, while volatility has made it harder to justify, the metal retains its safe haven appeal, the metal does have a few short term issues.
One of these is a lack of support from the physical market.
"The problem with gold right now is that the price of gold in India in rupees has been up substantially towards the latter part of 2011 and continues to be, making it difficult for the Indian consumer to support gold at these sort of prices," he explains.
* Gold posts biggest 1-day fall in a month
* Fed minutes showed policymakers less eager to easing
* Volume below average for third session, interest wanes
* Recent bright US economic outlook trims gold's appeal
* Coming up: U.S. ISM non-manufacturing index (Updates comments, market activity, adds details)
By Frank Tang and Michelle Martin
NEW YORK/LONDON, April 3 (Reuters) - Gold fell 2 percent on Tuesday for its biggest one-day drop in a month,
tumbling suddenly after the Federal Reserve released minutes of its March meeting, suggesting to investors that
policy makers were growing less eager to launch additional monetary stimulus measures. Bullion was already lower before the Fed released minutes of its most recent policy meeting, which suggested that officials of the U.S. central
bank were not ready to start a third round of government bond buying, or quantitative easing, known as QE3.
"The Fed has distanced itself from QE3. It's in line with what Bernanke said in February, but nonetheless it's
enough to reduce the near-term bullish momentum," said James Steel, chief commodity analyst at HSBC. Gold has now fallen below its levels in late January when the Fed said it would keep interest rates near zero until at least late
2014 and investors believed more easing was likely. Spot gold was down 2 percent at $1,643.60 an ounce by 3:24 p.m. EST (1924 GMT). It had gained as much as 2 percent in the two previous sessions.
Prior to the Fed minutes, U.S. gold futures for June delivery settled down $7.70 an ounce at $1,672. Trading volume rose after the Fed minutes but still was below normal for a third straight day. George Nickas, a precious metals broker at commodities firm INTL FCStone, said increased trading activity would be unlikely until gold can break out
of a recent trading range between $1,630 and $1,700 an ounce. In earlier trade, funds appeared uninterested in the gold trade as U.S. economic data for factory goods orders and auto sales pointed to a strengthening economic outlook.
In the minutes of the Fed's March meeting, policymakers noted signs of slightly stronger economic growth but remained cautious about a broad pick up in U.S. activity, focusing on a still-elevated jobless rate.
"It's fair to say the Fed remains conscious about the recovery, so perhaps this sell-off is overdone," said HSBC's Steel. However, the minutes suggest the appetite for another dose of quantitative easing, so-called QE3, has waned significantly. QE HOPES, INDIA STRIKE Ultra-loose monetary policy helped send gold to record highs in 2011.
But gold's climb stalled as a recent raft of firmer-than-expected U.S. economic data curbed expectations for a third round of quantitative easing. Prices have fallen around 8 percent since expectations for more Fed asset-buying pushed gold to $1,790 at the end of February, its highest price since November.
"The gold market has recently been very sensitive to Fed statements, so it is likely to react to the news,
" BNP Paribas analyst Anne-Laure Tremblay said. "The apparent absence of physical demand, notably with the strike of
Indian jewelers, has been weighing on prices." Gold demand from India, the world's biggest buyer of bullion,
remained sluggish as the prolonged strike by jewelers to protest excise taxes levied in the budget continued into a third week. Surging car sales, however, kept industrial precious metals such as platinum, palladium and silver from falling further. U.S. auto sales rose more than 15 percent in March as rising consumer confidence quickened
the pace of a sluggish recovery. Spot silver was down 1.2 percent at $32.58 an ounce, spot platinum eased
0.4 percent at $1,638.24 an ounce, and spot palladium inched down 0.2 percent at $648.85 an ounce.
3:24 PM EDT LAST/ NET PCT LOW HIGH CURRENT SETTLE CHNG CHNG VOL US Gold JUN 1672.00 -7.70 -0.5 1640.20 1682.70
US Silver MAY 33.265 0.167 0.5 32.465 33.295 42,255
US Plat JUL 1660.50 5.60 0.3 1642.00 1671.00 5,400
US Pall JUN 659.60 0.80 0.1 651.50 664.20 2,024 Gold 1643.60 -33.65 -2.0 1639.70 1680.66
Silver 32.580 -0.380 -1.2 32.500 33.270
Platinum 1638.24 -6.09 -0.4 1643.30 1663.74
Palladium 648.85 -1.53 -0.2 653.03 661.25
TOTAL MARKET VOLUME 30-D ATM VOLATILITY CURRENT 30D AVG 250D
AVG CURRENT CHG US Gold 152,903 204,770 197,139 18.19 1.09
US Silver 49,168 63,280 60,471 27.93 -0.15
US Platinum 5,507 11,159 8,412 19.92 0.05
US Palladium 2,034 5,163 4,685
(Additional reporting by Josephine Mason in New York, Jan Harvey in London;
editing by Jim Marshall and David Gregorio)
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