PRECIOUS-Gold firms after 3-day drop, Fed uncertainty persists

Tue Sep 24, 2013 2:35am EDT

* Fed official says taper still possible this year
    * SPDR inflows drop again, physical demand weak
    * Asian shares edge lower, dollar little changed 

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, Sept 24 (Reuters) - Gold edged up on Tuesday
after dropping for three sessions, but gains were limited as
uncertainty over when the U.S. Federal Reserve will begin
tapering its stimulus dented bullion's appeal as a hedge against
inflation.
    The Fed shocked markets last week by sticking with its $85
billion in monthly asset purchases, confounding expectations for
a $10-billion cut from September.
    But New York Fed President William Dudley said on Monday
that the central bank should still be able to reduce its support
for the economy later this year, while St. Louis Fed President
James Bullard earlier said that stimulus could be scaled back in
October depending on economic data. 
    "As long as this backdrop remains, we can expect gold prices
to remain volatile," said OCBC Investment Research's Lim Siyi,
who tracks exchange-traded funds. 
    "Most investors have a wait and see attitude right now
because it is very hard to predict the upside, especially with
all the speculative positions."
    Spot gold had risen 0.2 percent to $1,324.50 an ounce
by 0617 GMT. The metal shed 3.2 percent in the past three
sessions. 
    Worries that central banks printing money 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. 
    Speculators slashed bullish bets in futures and options of
U.S. gold and silver markets, a weekly report by the Commodity
Futures Trading Commission showed on Friday. 
        
    LACKLUSTRE PHYSICAL DEMAND
    Gold premiums across Asia remained weak due to lacklustre
physical demand ahead of what is typically a strong buying
period for top consumers India and China, which are headed into
a wedding and festival season.
    But the Fed uncertainty and India's attempt to cut gold
imports as it wrestles with its ballooning current account
deficit are keeping buyers at bay. 
    "Physical demand is not strong enough to support prices,"
Lim said. 
    Gold importers in India are hoping stocks lying at airports
will get customs clearance by Tuesday, following a meeting with
government officials last week, before they ship more for
exporters ahead of the Christmas season. 
    Holdings of SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, have been falling again after
a brief burst of inflows in August. 
    
  Precious metals prices 0617 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1324.50    2.96   +0.22    -20.90
  Spot Silver        21.67    0.07   +0.32    -28.43
  Spot Platinum    1422.49    6.89   +0.49     -7.33
  Spot Palladium    712.22    0.22   +0.03      2.92
  COMEX GOLD DEC3  1324.90   -2.10   -0.16    -20.94        16446
  COMEX SILVER DEC3  21.74   -0.12   -0.56    -28.28         8730
  Euro/Dollar       1.3499
  Dollar/Yen         98.91
 
  COMEX gold and silver contracts show the most active months
 
 
 (Editing by Himani Sarkar and Joseph Radford)
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