PRECIOUS-Gold down, worries over central bank stimulus weigh

Tue Jun 11, 2013 3:34pm EDT

* BoJ stands pat on stimulus; speculation mounts over Fed
    * Largest gold ETF reports biggest inflow in a month
    * Correlation between gold, US equities weakens
    * Coming up: U.S. Federal Budget Wednesday

 (Adds market details, graphic link, updates prices)
    By Frank Tang and Jan Harvey
    NEW YORK/LONDON, June 11 (Reuters) - Gold hit a near
three-week low on Tuesday, ending lower as a lack of new
economic stimulus from the Bank of Japan fueled worries that
other central banks may also withdraw their support, denting
bullion's inflation-hedge appeal.
    The precious metal was down as much as 1.4 percent after the
Bank of Japan said it held off on new measures, arguing that
bond markets had stabilized. Gold closed around 0.6 percent
lower. 
    "The BoJ has given the market the impression that there will
not be any more stimulus," said Carlos Perez-Santalla at
brokerage Marex Spectron.
    Monday's comments by St. Louis Fed President James Bullard
on low U.S. inflation also weighed heavily on gold, whose prices
largely depend on inflation hopes, said Perez-Santalla.
 
    Spot gold was down 0.6 percent at $1,378.51 an ounce
by 3:22 p.m. EDT (1922 GMT), having earlier hit $1,366.65, the
lowest since May 23.
    U.S. Comex gold futures for August delivery settled
down $9 an ounce at $1,377, with trading volume about 35 percent
below its 30-day average, preliminary Reuters data showed.
    Gold had already been hurt by talk the U.S. Federal Reserve
may be set to taper its monetary easing sooner than expected,
after Standard & Poor's lifted its U.S. sovereign credit outlook
on Monday and a U.S. payrolls report last week beat forecasts.
    Analysts said that the notion that the Fed will taper its
bond-buying program will further pressure the price of gold,
whose rally in the last several years has been driven by
inflation worries due to central bank stimulus.
    The BoJ news also the S&P 500 index around 0.5
percent lower, even though both equities and bullion have
trimmed earlier losses. 
    However, the link between gold - a traditional safe haven -
and U.S. equities has recently been erratic at best. The 25-day
correlation-log between spot gold and the S&P was at a -0.06 on
Tuesday, suggesting very weak inverse correlation.
    (Graphic: link.reuters.com/ter78t)
    
    PHYSICAL DEMAND DOWN, ETF SEES INFLOW
    Dealers in Singapore said gold demand had eased after a jump
in April, which followed the biggest two-day fall in gold prices
in 30 years. 
    Meanwhile, fund selling in the gold market is showing signs
that it may bottom soon.
    The world's largest gold-backed exchange-traded fund SPDR
Gold Trust reported its largest inflow in over a month on
Monday, of 2.7 tonnes. Its holdings remained near four-year
lows, however, down 340 tonnes this year. 
    Among other precious metals, silver was down 0.9
percent at $21.71 an ounce. Platinum slipped 1.4 percent
to $1,480.75 an ounce and palladium dropped 2.4 percent
at $749.31 an ounce.
 3:04 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold AUG   1377.00  -9.00  -0.6  1364.50 1387.20  130,697
 US Silver JUL  21.646 -0.279  -1.3   21.400  21.960   41,000
 US Plat JUL   1479.90 -27.00  -1.8  1475.40 1511.10   11,599
 US Pall SEP    752.50 -16.90  -2.2   750.00  772.15    3,364
                                                              
 Gold          1378.51  -7.89  -0.6  1367.63 1387.31         
 Silver         21.710 -0.200  -0.9   21.520  22.010
 Platinum      1480.75 -21.75  -1.4  1479.75 1509.50
 Palladium      749.31 -18.69  -2.4   752.52  768.75
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        142,214   220,939   181,683     22.59    0.39
 US Silver       55,194    54,597    56,088     31.93   -2.40
 US Platinum     13,048    11,716    11,679     22.58    0.39
 US Palladium     3,463     6,384     5,571                  
                                                              
 

 (Editing by Bob Burgdorfer and Marguerita Choy)