PRECIOUS-Gold down more than 1 pct on Fed jitters, equities gain

Tue Jun 18, 2013 1:06pm EDT

* Uncertainty about Fed meeting weighs on gold
    * Short-covering possible if Fed stays put with stimulus
    * Demand still soft in India, China - traders

 (Updates throughout; adds comments, second byline, and NEW YORK
to dateline)
    By Frank Tang and Jan Harvey
    NEW YORK/LONDON, June 18 (Reuters) - Gold fell more than 1
percent on Tuesday as U.S. equities rallied and bullion buyers
took to the sidelines before the conclusion of a two-day Federal
Reserve policy meeting they hope will give greater clarity on
the outlook for U.S. monetary policy.
    The metal fell for a second day as its safe-haven appeal was
reduced by the rise of U.S. equities on hopes that the Fed will
maintain its current level of stimulus at the end of its Open
Market Committee meeting on Wednesday. 
    Traders are trying to anticipate the Fed's timetable for
winding down purchases of $85 billion per month of bonds, a
program known as quantitative easing. 
    Gold, a traditional inflation hedge, has been under pressure
after top Fed policymakers said the central bank could scale
back its stimulus measures.
    Analysts said, however, gold could stage a short-covering
rally after the conclusion of the meeting.
    "Should the FOMC not come any closer to giving greater
clarification on the asset-buying program, then the gold market
could rally and investors who have been shorting gold in
anticipation of a Fed move away from QE may have to cover," said
James Steel, chief precious metals analyst at HSBC.
    "This could prompt a challenge of the $1,400 an ounce
level," Steel said.
    Spot gold was down 1.2 percent at $1,367.60 an ounce
at 12:36 p.m. EDT (1636 GMT). 
    U.S. Comex gold futures for August delivery fell $16
an ounce to $1,367.10.
    Concerns that U.S. monetary policy may be reined in have
helped knock gold prices 18 percent lower this year. Gold
analysts say that move may have become overdone, however.
    "Gold is trading weaker on the fear that the FOMC may reduce
the volume (of quantitative easing)," said Peter Fertig, a
consultant at Quantitative Commodity Research. "But if anything
they will be scaling out gradually, there will not be an abrupt
end to QE."

    INDIAN, CHINESE BUYERS HOLD OFF
    Physical demand retreated in India and China, the top two
consumers of bullion, from peak levels reached after a steep
sell-off in April.
    A Hong Kong precious metals trader said premiums there had
fallen to $2 an ounce over London spot prices, from a high of $6
last month. Hong Kong sells mainly to buyers in China.
    Any signs of a significant slowdown in the Chinese market
would be a big blow to bullion prices because investors expect
China to offset slower buying from India.
    Demand in India has eased since the government increased the
import duty on bullion by a third in an effort to reduce its
current account deficit. 
    Among other precious metals, silver was down 0.7
percent at $21.67 an ounce. Platinum gained 0.5 percent
to $1,437.25 an ounce and palladium fell 1 percent to
$705.72 an ounce.
 Prices at 12:36 p.m. EDT (1636 GMT)                           
 
                               LAST      NET    PCT     YTD
                                         CHG    CHG     CHG
 US gold                    1367.10   -16.00  -1.2%  -18.4%
 US silver                   21.680   -0.001  -0.6%  -28.3%
 US platinum                1439.80     5.00   0.4%   -6.4%
 US palladium                709.45    -8.40  -1.2%    0.9%
 
 Gold                       1367.60   -16.75  -1.2%  -18.3%
 Silver                       21.67    -0.15  -0.7%  -28.5%
 Platinum                   1437.25     7.25   0.5%   -6.5%
 Palladium                   705.72    -6.78  -1.0%    0.5%
 
 Gold Fix                   1366.75   -11.75  -0.9%  -17.9%
 Silver Fix                   21.80    -7.00  -0.3%  -27.2%
 Platinum Fix               1427.00     1.00   0.1%   -6.3%
 Palladium Fix               706.00     3.00   0.4%    1.0%
 
 (Additional reporting by A. Ananthalakshmi in Singapore;
Editing by David Goodman, Jane Baird and Peter Galloway)
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Comments (1)
Short term bouncing of the physical gold price really doesn’t matter. Due to gradual changes of the world financial and monetary order gold will be in significant demand in next 5 years. BRICS, mainly China want demise of US dollar as a reserve currency, and to exchange it with a sort of basket of currencies/gold backed something. Thus they have to purchase substantial amount of 170 000 Mt of existing physical gold. Gold is currently at about USD 45 million per Mt. The largest holders have US 8000 Mt and Germany over 3000 Mt. China can spend 20% of its foreign reserves for purchase that means 680 billion USD. Price will substantially rise, but nevertheless they would by up to 10 000 Mt of gold. Chinese purchases are caused by political and long term macroeconomic reasons so it doesn’t matter if the buy at 45m per Mt (1400 per oz) or at 68m per Mt (2100 per oz).

Jun 18, 2013 2:06am EDT  --  Report as abuse
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