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PRECIOUS-Gold slips on tame U.S. inflation, market braces for Fed
September 17, 2013 / 10:11 AM / 4 years ago

PRECIOUS-Gold slips on tame U.S. inflation, market braces for Fed

* U.S. consumer price index rises 0.1 percent in August
    * India hikes gold jewellery import duty to 15 percent from
10 percent
    * Gold volatility could spike if Fed surprises on policy
    * Coming up: Fed statement, press conference Wednesday

 (Adds analyst comment, updates market activity)
    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, Sept 17 (Reuters) - Gold fell on Tuesday on
muted U.S. inflation data and as investors braced for the
expected announcement by the Federal Reserve of a reduction in
its bond-buying stimulus.
    A sharp hike in top bullion consumer India's import duty on
gold jewellery also dented buying sentiment in the physical
market.
    The U.S. Labor Department said consumer prices barely rose
0.1 percent in August but analysts said rising rents and medical
care costs might prompt the Fed to begin scaling back, or
tapering, its economic stimulus measures. 
    The Federal Open Market Committee meets Tuesday and
Wednesday and economists polled by Reuters expect policy makers
at the U.S. central bank to announce a $10 billion reduction in
the Fed's $85 billion monthly bond-buying program, beginning
September. 
    Analysts said gold prices could rally if the Fed decides not
to begin tapering this month, or announces a reduction in bond
buying that is less than the market expects.
    "If the Fed turns out to be anything other than what traders
have been expecting on tapering, we are going to see much higher
gold prices," said Miguel Perez-Santalla, vice president at
BullionVault.
    Spot gold fell 0.2 percent to $1,310.55 an ounce by
3:13 p.m. EDT (1913 GMT). On Monday, gold tumbled 1.5 percent to
a five-week low of $1,303.85. 
    U.S. gold futures for December settled down $8.40 an
ounce to $1,309.40, with trading volume about 10 percent below
its 30-day average.
    Signs of U.S. economic weakness, such as disappointing
nonfarm payrolls data for August, have made some investors
suspect that the Fed might postpone cutting monetary stimulus.
    Gold has dropped 22 percent this year as the Fed signalled
it would start reining in its massive bond-buying stimulus that
has boosted financial liquidity in the market.
    "We tend to believe the bulk of gold declines based on
tapering are already largely factored into current prices," said
James Steel, chief precious metals analyst at HSBC.

    FED'S FUTURE STANCE EYED
    Investors will also focus on the U.S. central bank's outlook
on future monetary policy on Wednesday, analysts said.
    Goldman Sachs said in a note it was neutral on gold in the
near term, but expected the metal to make fresh lows in 2014 as
hopes of better U.S. growth could reduce the need for monetary
stimulus. 
    In the physical gold market, India increased its import duty
on gold jewellery from 10 percent to 15 percent, the finance
ministry said on Tuesday, setting it higher than the duty on raw
gold in a move to protect the domestic jewellery industry.
 
    However, gold prices at below $1,300 an ounce should trigger
retail buying, said BullionVault's Perez-Santalla.
    In other precious metals, silver edged up 0.1 percent
to $21.72 an ounce, after falling 2.3 percent in the previous
session. Platinum fell 0.9 percent to $1,420.99 an ounce,
while palladium gained 0.2 percent to $702.72 an ounce.
 3:13 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1309.40  -8.40  -0.6  1305.80 1324.70  127,340
 US Silver DEC  21.784 -0.225  -1.0   21.640  22.140   33,037
 US Plat OCT   1422.40 -18.80  -1.3  1419.30 1448.00   10,906
 US Pall DEC    706.95   0.90   0.1   697.85  712.05    2,434
                                                              
 Gold          1310.55  -2.84  -0.2  1306.65 1323.31         
 Silver         21.720  0.020   0.1   21.650  22.080
 Platinum      1420.99 -12.61  -0.9  1422.50 1445.00
 Palladium      702.72   1.72   0.2   699.77  707.75
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        137,446   157,250   180,644     24.19    0.16
 US Silver       34,037    67,881    57,831     37.53    0.23
 US Platinum     13,489    11,001    12,310     20.41    0.00
 US Palladium     2,547     6,923     5,867                  
                                                              
   

 (Additional reporting by A. Ananthalakshmi in Singapore;
Editing by James Jukwey, David Gregorio and James Dalgleish)

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