PRECIOUS-Gold hovers above $1,300 on U.S. stimulus bet

Mon Oct 21, 2013 2:49am EDT

* Gold near 1-1/2-week peak after best week since Aug
    * Fed stimulus tapering seen likely in Dec meeting
    * Coming up: U.S. existing home sales at 1400 GMT

 (Updates gold prices, adds silver)
    By Manolo Serapio Jr
    SINGAPORE, Oct 21 (Reuters) - Gold edged up to near
one-and-a-half-week highs above $1,300 an ounce on Monday,
supported by expectations the Federal Reserve would hold off
curbing its economic stimulus while the United States eyes a
more lasting fix to its budget problems.
    Gold posted its best weekly gain in two months last week as
bets grew that the Fed would postpone tapering its bond-buying
as focus turns to finding a more permanent solution to
Washington's fiscal woes.
    The U.S. budget deal last week extends the U.S. government's
borrowing authority through Feb. 7 and restores federal funding
through Jan. 15, threatening a further crisis early next year.
    Spot gold was up 0.3 percent at $1,319.49 an ounce by
0624 GMT. The metal touched $1,325.21 on Friday, its highest
since Oct. 8. It rose 3.4 percent last week.
    U.S. gold futures gained 0.4 percent to $1,319.60 an
ounce.
    Silver outperformed gold, with spot up 1.4 percent at
$22.18 an ounce and U.S. futures also rising 1.4 percent
to $22.21.
    "Given the U.S. government shutdown and the risk that the
U.S. economy is facing, expectations for tapering in October
seem less strong than before," said Barnabas Gan, analyst at
OCBC Bank.
    The Fed holds its next policy meeting on Oct. 29-30, and Gan
said if the central bank decides to stick with its current pace
of bond-buying, gold may rise further towards $1,350. 
    The U.S. monetary stimulus which has burnished gold's appeal
as a hedge against inflation had fueled gold's rally, pushing it
to a record $1,920.30 in September 2011. But anticipation that
the stimulus would be scaled back dragged bullion down to
three-year lows below $1,200 in July, putting it on course for
its first annual decline in 13 years.
    Gan said he still expects the Fed to decide to start cutting
its stimulus at the December meeting, with the U.S. economic
recovery story likely to continue.
    The sustained decline in holdings of exchange-traded funds
as well as tepid physical demand may also limit bullion's gains
going forward. 
    Holdings of the largest gold-backed exchange-traded-fund,
New York's SPDR Gold Trust are at the lowest since 2009
and demand from top consumer India has been curbed by policies
aimed at restricting imports to tame its current account
deficit. 
    "In our view, gold is likely to struggle to build upon the
rally in a sustained fashion unless physical demand shows signs
of considerable improvement and investor sentiment turns more
favourable," Barclays Capital said in a note.       
  Precious metals prices 0624 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1319.49    3.74   +0.28    -21.20
  Spot Silver        22.18    0.30   +1.37    -26.75
  Spot Platinum    1438.00    6.90   +0.48     -6.32
  Spot Palladium    742.72    4.22   +0.57      7.33
  COMEX GOLD DEC3  1319.60    5.00   +0.38    -21.26        14476
  COMEX SILVER DEC3  22.21    0.30   +1.36    -26.71         6383
  Euro/Dollar       1.3679
  Dollar/Yen         98.08
 
  COMEX gold and silver contracts show the most active months
 

 (Reporting by Manolo Serapio Jr.; Editing by Joseph Radford)
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.