PRECIOUS-Gold steadies after drop, but Fed stimulus concerns stay

Wed Aug 14, 2013 3:39am EDT

* Traders hold back big bets on strong U.S. data
    * U.S. economic performance remains mixed  - Fed official
    * India increases gold duty again

 (Recasts, updates prices)
    By A. Ananthalakshmi
    SINGAPORE, Aug 14 (Reuters) - Gold steadied on Wednesday
after dropping more than 1 percent in the previous session, but
worries over when the U.S. Federal Reserve would begin tapering
its bullion-friendly stimulus continued to drag on prices.
    The Fed's bond buying is tantamount to printing money and a
pull back in the scheme would hurt gold's appeal as a hedge
against inflation. Uncertainty over the timing of the roll back
has already pushed the metal down 21 percent this year, after 12
annual gains. 
    "What would be extremely welcome is some clarity," said
analyst Dominic Schnider of UBS Wealth Management in Singapore.
    "And I think September would be the ideal time to provide
clarity. Some market expectations are shifting towards a
December tapering," he added.
    The U.S. economic performance remains too mixed for Fed
policymakers to lay out a detailed path for reducing and
eventually halting their asset-purchasing next month, Atlanta
Fed President Dennis Lockhart said on Tuesday. 
    Spot gold inched down 0.1 percent to $1,319.31 an
ounce by 0703 GMT, after a sharp 1 percent drop in the previous
session that ended a four-day winning streak.
    Tuesday's drop was caused by strong U.S. economic data and
further import curbs by key buyer India.
    U.S. retail sales rose in July, data showed on Tuesday,
pointing to an acceleration in consumer spending that could
bolster the case for a Fed tapering.     
    The next Fed meeting is scheduled for Sept. 17-18. Until
then, markets will scrutinise data to gauge the strength of
economic recovery.
    "Once the taper is out, it will hit gold once more", though
likely not to the same extent as drops earlier this year,
Schnider said.
        
    INDIA CURBS
    India hiked the import duty on gold yet again to a record 10
percent and raised excise duty on the metal, as imports jumped
in July despite the government's attempts to strangle supply and
curb demand to rein in dollar spending. 
    Gold prices in India are likely to rise this week, extending
gains past their four-month high, due to the import duty hike.
    "Despite the expectations that gold imports may fall,
India's appetite for bullion is anticipated to pick-up later in
the year due to seasonal demand," HSBC analysts wrote in a note.
    Analysts say this could increase further illegal gold supply
into India.
    
  Precious metals prices 0703 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1319.31   -1.38   -0.10    -21.21
  Spot Silver        21.30   -0.11   -0.51    -29.66
  Spot Platinum    1484.25  -13.25   -0.88     -3.31
  Spot Palladium    732.50   -4.00   -0.54      5.85
  COMEX GOLD DEC3  1318.90   -1.60   -0.12    -21.30        21895
  COMEX SILVER SEP3  21.31   -0.04   -0.18    -29.70         7465
  Euro/Dollar       1.3258
  Dollar/Yen         98.34
 
  COMEX gold and silver contracts show the most active months
 

 (Editing by Himani Sarkar)
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