April 24, 2012 / 7:30 PM / 5 years ago

PRECIOUS-Gold rises on Wall St gains; options, Fed in focus

5 Min Read

* Gold up on equities, industrial metals rise
    * Options-related selling, FOMC uncertainty cap gains
    * Volume weak for third day
    * India demand disappointing despite gold-buying event
    * Coming Up : Two-day FOMC meeting starts Tuesday

 (Recasts, updates prices, market activity)	
    By Frank Tang and Jan Harvey	
    NEW YORK/LONDON, April 24 (Reuters) - Gold prices rose on
T uesday, following gains in equities and industrial metals, but
selling pressure capped gains ahead of a U.S. option expiration
and on uncertainty over a U.S. Federal Reserve policy meeting.	
    Bullion, which for most of this year has tracked riskier
assets, climbed as U.S. equities rose after strong earnings from
bellwether U.S. companies and a mildly encouraging U.S. home
sales report. A rally in copper prices also lifted gold. 	
    Trading volume was below average for a third straight
session, as investors waited for Fed policy makers to announce
the outcome on Wednesday of their two-day meeting.	
    Price volatility could spike ahead of Wednesday's May COMEX
options expiry, as both call and put options investors look to
profit from heavy bets at the $1,650 strike price. There are
currently around 10,000 lots in calls and around 30,000
contracts in puts at the popular price, traders said.	
    The holder of a put option has the right, but not the
obligation, to sell an asset at the put price.	
    "Right now, the long-put buyers have the control because
they are in the money," said Anthony Neglia, president of Tower
Trading and a COMEX gold options floor trader.	
    "If the put buyers are under-hedged, they are going to buy
some gold. Conversely, for the short put sellers, if they are
under-hedged, they are going to sell some gold. So we may be
trapped in this range," he said.	
    Spot gold was up 0.3 percent at $1,642 an ounce by
2:31 p.m. EDT (1831 GMT)	
    U.S. gold futures for June delivery settled up $11.20
an ounce at $1,643.80. 	
    Volume was about 40 percent below its 30-day norm, sharply
below average for a third straight day, preliminary Reuters data
showed, after it fell to the year's low on Friday.	
    Traders said that better performance of the U.S. equities,
driven by a brighter U.S. economic outlook and subsiding risks
of the European debt crisis, has reduced investor interest in
the gold trade.	
    In addition, physical demand from top gold consumer India
remained disappointing. Spending on gold at this year's Hindu
festival of Akshaya Tritiya, a major gold-buying event, has been
subdued compared with the usual splurge. 	
    Gold investors will closely monitor the language of a FOMC
policy statement for the central bank's latest monetary outlook.	
    Fed policymakers are sounding the alarm over a "fiscal
cliff" at the end of this year, when scheduled U.S. tax hikes
and spending cuts could pose a big threat to the fragile
economic recovery. 	
    Gold has declined around $150 in the past two months, as
some funds might have reduced bullish bets on gold after a
string of positive U.S. economic data dashed hopes of further
Fed easing.	
    The metal hit a 2012 high at $1,790 an ounce on Feb. 29
after the Fed at that time said it would keep interest rates
near zero until at least by the end of 2014.	
    Among other precious metals, silver edged down 0.3
percent at $30.73 an ounce. Spot platinum fell 0.8
percent to $1,514.50 an ounce, while palladium dropped
0.7 percent to $662.97.	
 2:31 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold JUN   1643.80  11.20   0.7  1634.60 1650.10   96,615
 US Silver MAY  30.746  0.215   0.7   30.635  31.110   43,495
 US Plat JUL   1548.10  -8.20  -0.5  1545.00 1562.20    7,318
 US Pall JUN    665.80  -5.10  -0.8   665.45  679.00    2,332
 Gold          1642.00   4.37   0.3  1634.56 1648.91         
 Silver         30.730 -0.080  -0.3   30.690  31.120
 Platinum      1541.50 -12.00  -0.8  1547.70 1560.00
 Palladium      662.97  -4.63  -0.7   667.75  676.00
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        104,023   184,648   196,526     17.89    0.06
 US Silver       64,881    51,372    59,229     30.47    3.23
 US Platinum      7,376     9,518     8,490        19    0.00
 US Palladium     2,412     3,305     4,684                  
 (Editing by Marguerita Choy and David Gregorio)

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