PRECIOUS-Gold edges down, investors cautious ahead of Fed

Wed May 1, 2013 2:23am EDT

* Gold slips, physical trading slow due to holiday
    * Investors await Fed statement
    * ETFs holding lowest since September 2009

 (Updates prices)
    By Lewa Pardomuan
    SINGAPORE, May 1 (Reuters) - Gold ticked lower on Wednesday
on a lack of physical buying and as investors waited to see if
the U.S. Federal Reserve sticks to its stimulus programme to
spur the economy, which may boost the metal's appeal as a hedge
against inflation.
    The Fed's policy-making committee ends its meeting later in
the day with a statement that could reflect recent weak economic
data. Investors also await Friday's non-farm payrolls data,
which will signal the longer-term prospects for the Fed's
monetary stimulus.
    Fears that central banks' money-printing to buy assets will
stoke inflation have been a key driver in boosting gold, which
rallied to an 11-month high last October, after the Fed
announced its third round of aggressive economic stimulus.
    Gold fell $1.89 an ounce to $1,474.71 by 0602 GMT,  
with the market torn between hopes that the Fed will keep its
current policy and daily outflows from exchange-traded funds, as
investors cut their exposure. 
    "Accommodative policies are generally seen as supportive for
gold, but as the events of the last few weeks have demonstrated,
the precious metal does not always move in lockstep with simple
expansion in money supply," said Edward Meir, a metals analyst
at futures brokerage INTL FCStone.
    "Instead, it seems to pick up steam either as a result of
turmoil in the financial markets or on the back of higher
inflation readings, neither of which seem to be prevalent at
this particular time."
    U.S. gold futures for June delivery stood at
$1,474.20 an ounce, up $2.10.   
    Cash gold and U.S. futures tumbled to around $1,321 on April
16, their lowest in more than two years, after a drop below
$1,500 sparked a selloff that stunned investors and prompted
them to slash holdings of exchange-traded funds. 
    SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, said its holdings fell 0.19 percent to
1078.54 tonnes on Tuesday, their lowest since September 2009.
 
    But gold has recovered more than half of its $225 loss 
incurred between April 12 and 16, boosted by strong physical
demand, especially in top bullion consumers China and India.
    "With investment flows negative but monetary policy
supportive, we think a neutral fundamental rating is the most
appropriate one. In contrast to neutral fundamentals, technical
indicators are clearly negative," said Credit Suisse in a
report.
    "The longer-term trend has been broken to the downside. This
fact is significant because in a downtrend the default move of a
price is lower in the absence of convincing fundamentals. With
fundamentals only neutral, we think some risk still persists." 
    Overall trading was quiet, with most markets in Asia shut
for a holiday, although Japan was open. Tokyo gold futures
, which often dictate movements in cash gold and U.S.
futures, ticked higher on Wednesday, shrugging off disappointing
Chinese manufacturing data. 
    Premiums for gold bars were little changed in Tokyo at up to
$1 to the spot London prices, levels last seen in July 2012
before they were revisited two weeks ago, following a surge in
physical buying. 
    Hong Kong and Singapore were closed for a holiday. A rush in
buying of gold bars after the recent plunge in prices has led to
tight physical supply in Asia.
    "We have a similar tight situation in Japan, because there
has been a lot of buying from China and other regions in Asia,"
said a dealer in Tokyo. "But at this moment, buying interest
from the Japanese is not so huge," said the dealer, adding that
domestic retail investors had paused for breath after recent
purchases. 
    In other markets, the dollar eased on Wednesday as investors
warily awaited the outcome of the U.S. Federal Reserve's policy
meeting, while expectations the European Central Bank will cut
interest rates on Thursday capped the euro. 
       
  Precious metals prices 0602 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1474.71   -1.89   -0.13    -11.93
  Spot Silver        24.21   -0.07   -0.29    -20.05
  Spot Platinum    1502.49   -1.01   -0.07     -2.12
  Spot Palladium    695.28    0.28   +0.04      0.47
  COMEX GOLD JUN3  1474.20    2.10   +0.14    -12.03         7524
  COMEX SILVER MAY3  24.18    0.04   +0.15    -20.01           55
  Euro/Dollar       1.3168
  Dollar/Yen         97.36
 
 (Editing by Clarence Fernandez and Richard Pullin)
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