PRECIOUS-Gold falls 1.8 pct to 6-month low, Fed decision weighs

Thu Dec 19, 2013 12:47pm EST

* Gold extends sharp pullback to third consecutive day
    * Less inflation fears prompt funds to short gold
    * Less than $20 above key support at three-year low at
$1,180
    * Coming up: US Core PCE price index Friday


    By Frank Tang and Jan Harvey
    NEW YORK/LONDON, Dec 19 (Reuters) - Gold slid nearly 2
percent on Thursday to its lowest since late June as the U.S.
Federal Reserve took its first step in winding down the era of
easy money that has helped drive bullion prices to record highs.
    The U.S. central bank on Wednesday modestly trimmed the pace
of its monthly asset purchases, by $10 billion to $75 billion.
In fresh quarterly forecasts, it also lowered its expectations
for both inflation and unemployment over the next few years.
 
    "A lot of gold investors are anticipating deflation not
inflation as a result of the Fed announcement, taking advantage
of the downside momentum and shorting gold at least
temporarily," said Jeffrey Sica, chief investment officer of New
Jersey-based Sica Wealth with over $1 billion in client assets. 
   
    Gold extended its decline to a third consecutive day, and
was the hardest hit of the major financial benchmarks by the
taper. The S&P 500 equities index eased after ending at a
record high on Wednesday, while the dollar index rose sharply
for a second day.
    Spot gold was down 1.8 percent at $1,196.31 an ounce
by 12:14 p.m. EST (1714 GMT), having earlier hit $1,193.60, its
lowest since June 28. 
    Following its break of $1,200 an ounce, the metal is now
less than $20 above its key support of $1,180.71 an ounce, a
three-year low. Analysts said gold will be vulnerable to a much
sharper pullback should prices drop below the level.
    U.S. Comex gold futures for February delivery were
down $39.20 an ounce at $1,195.80, with trading volume on track
to finish above its 30-day average, preliminary Reuters data
showed.
    Sean Corrigan, chief investment strategist at
Switzerland-based Diapason Commodities Management, said that
investors are seeing little argument in favour of gold at
present.
    Investors are continuing to sell out of gold-backed
exchange-traded funds, which have seen outflows of some 800
tonnes this year to a 3-1/2 year low. The largest gold ETF, SPDR
Gold Shares, said its holdings fell another 4.2 tonnes on
Wednesday.
    Among other precious metals, silver was down 2.7
percent to $19.19 an ounce. Platinum was down 1 percent
at $1,317.25 an ounce, while palladium eased 0.3 percent
to $693.25 an ounce. 
 Prices at 12:14 p.m. EST (1714 GMT)                          
 
                               LAST      NET    PCT     YTD
                                         CHG    CHG     CHG
 US gold                    1195.80   -39.20  -3.2%  -28.6%
 US silver                   19.185   -0.009  -4.4%  -36.5%
 US platinum                1319.80   -22.90  -1.7%  -14.2%
 US palladium                695.90    -3.55  -0.5%   -1.1%
 
 Gold                       1196.31   -21.31  -1.8%  -28.6%
 Silver                       19.19    -0.53  -2.7%  -36.7%
 Platinum                   1317.25   -13.75  -1.0%  -14.3%
 Palladium                   693.25    -2.25  -0.3%   -1.2%
 
 Gold Fix                   1196.00    -9.25  -0.8%  -28.1%
 Silver Fix                   19.34   -60.00  -3.0%  -35.4%
 Platinum Fix               1321.00     7.00   0.5%  -13.3%
 Palladium Fix               700.00     4.00   0.6%    0.1%
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