* U.S. consumer price index rises 0.1 percent in August
* India hikes gold jewellery import duty to 15 percent from
* 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 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
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
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
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
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)