PRECIOUS-Gold hits 1-month low on Bernanke's reduced stimulus talk

Wed Jun 19, 2013 4:13pm EDT

* Bernanke says Fed could end QE by mid-2014
    * Pace of bond buying could moderate later in 2013
    * Fed says risks to growth, jobs have lessened since fall
    * Coming up: US jobless claims, existing home sales Thurs

 (Updates throughout, adds details after FOMC)
    By Frank Tang and Jan Harvey
    NEW YORK/LONDON, June 19 (Reuters) - Gold fell to a
one-month low on Wednesday after the U.S. Federal Reserve
chairman said he expects to slow the pace of the central bank's
bond purchases later this year and bring them to a halt around
mid-2014.
    After trading higher most of the session, bullion prices
tumbled after the Fed sharply lowered its forecast for inflation
in a statement released at the end of its two-day policy
meeting. 
    The precious metal fell further after Fed Chairman Ben
Bernanke said at a later press conference on the Fed's decision
that "The committee currently anticipates that it will be
appropriate to moderate the monthly pace of purchases later this
year."
    Bernanke said that the Fed will continue to reduce the pace
of purchases in measured steps through the first half of next
year, ending purchases around mid-year if the Fed's economic
forecasts are correct. 
    Gold fell as global markets were rattled by the Fed chief's
comment, with U.S. equities falling around 1 percent and
Treasuries bond yields, seen as U.S. short-term interest rates,
rising sharply and the dollar index up 1 percent. 
  
    "Bernanke is talking about pulling away stimulus, and that's
not really what the market wants to hear. The more stimulus
there is, the more powerful the inflationary case for gold,"
said Sean McGillivray, head of asset allocation at Great Pacific
Wealth Management. 
    Spot gold was down 1.3 percent to $1,349.86 an ounce
by 3:49 p.m. EDT (1949 GMT), having hit $1,348.99, its lowest
price since May 20.
    Prior to the Fed announcement, U.S. Comex gold futures
 for August delivery settled up $7.10 an ounce at $1,374.
    Trading volume was at around 125,000 lots versus its 30-day
daily average of 215,000, preliminary Reuters data showed.   
    Since Bernanke said last month the bank could scale back its
stimulus measures, gold prices have fallen in tandem with the
S&P 500. (Graphic: link.reuters.com/hyb68t)
    McGillivray, however, said gold might still benefit from Fed
stimulus in the near term.
    "I don't think the country can stop buying bonds. The
economy is still fragile and the cost of capital will increase
so substantially as you are seeing in bonds right now," he said.
    The yield on benchmark U.S. Treasury notes rose
to fresh 14-month high on Wednesday after Bernanke's remarks.

    INFLATION GAUGE LOWERED
    In a statement, the Fed's policy-setting panel offered a
more upbeat assessment of the risks facing the economy than they
had after they last met in May. 
    In a sharp downgrade, the Fed forecast the PCE price index,
its preferred gauge of the price pressures facing consumers,
would rise just 0.8 to 1.2 percent this year. However, it saw
inflation heading back to 1.4 to 2.0 percent in 2014 and 1.6 to
2.0 percent in 2015.
    "You are looking at continued slow growth but no inflation
and no panic on the horizon, that makes gold less attractive and
ultimately makes stocks more attractive," said Frank McGhee,
head precious metals trader at Integrated Brokerage Services
LLC.    
    Among other precious metals, silver was down 1.6
percent at $21.30 an ounce. Platinum dropped 1.7 percent
to $1,415.49 an ounce and palladium fell 2.2 percent to
$692.22 an ounce.    
 3:49 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold AUG   1374.00   7.10   0.5  1348.50 1376.00  121,493
 US Silver JUL  21.623 -0.054  -0.2   21.190  21.850   38,125
 US Plat JUL   1423.90 -16.20  -1.1  1417.10 1443.50   10,203
 US Pall SEP    696.40 -11.95  -1.7   694.00  713.45    3,926
                                                               
 Gold          1349.86 -17.93  -1.3  1348.99 1375.41         
 Silver         21.300 -0.340  -1.6   21.290  21.800
 Platinum      1415.49 -24.51  -1.7  1420.50 1440.50
 Palladium      692.22 -15.78  -2.2   696.77  710.50
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        125,984   213,568   180,780      21.5   -0.50
 US Silver       51,543    54,592    56,572     31.23    0.78
 US Platinum     13,675    13,141    11,718     21.91   -1.19
 US Palladium     3,943     6,463     5,576                  
                                                               
 

 (Reporting by Frank Tang; Editing by Marguerita Choy)
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