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PRECIOUS-Gold drops to 6-month low on taper sell-off, could fall further
December 20, 2013 / 4:20 AM / 4 years ago

PRECIOUS-Gold drops to 6-month low on taper sell-off, could fall further

* Gold hits fresh 6-month low, close to weakest in 3-1/2 yrs
    * Prices could fall below 2013-low on Fri - trader
    * SPDR outflows continue, physical demand lacklustre

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, Dec 20 (Reuters) - Gold languished at a six-month
low on Friday and was on the edge of tipping over to a 3-1/2
year trough after the Federal Reserve's move to curb its
bond-buying stimulus prompted a huge sell-off.
    This week's loss puts the metal firmly on track to post its
biggest annual loss in 32 years.
    Spot gold fell to a fresh six-month low of $1,185.10
an ounce earlier on Friday, before clawing back some ground to
$1,192.80 by 0731 GMT due to bargain-hunting. 
    Analysts and traders say charts and sentiment remain
bearish, with gold at risk of falling further.
    "Asian trading volumes are really thin so I don't expect
much movement (immediately). But through the day I think we
could take out the year-lows," a Hong Kong-based precious metals
trader said late in the morning.
    "Sentiment took a real beating yesterday. Many people were
surprised with the delayed reaction to the taper news. I
wouldn't be surprised if we end the year below $1,200."
    On Wednesday, the day of the Fed announcement of a $10
billion cut in its monthly bond purchases, gold fell 1 percent.
But the selling picked up on Thursday, with the metal losing 2
percent, close to the 2013 low of $1,180.71 in late June - which
is also the lowest since 2010.
    Gold has lost about 3 percent for the week, and 29 percent
for the year.   
    The Fed's $85 billion in monthly bond purchases, along with
other monetary stimulus measures, had fuelled a big run-up in
gold prices in the last few years, with the metal hitting an
all-time high of $1,920.30 in 2011. 
    However, with an improving economy and stubborn
low-inflation in the United States, gold's appeal has dropped
off.
    "Gold dropped through multiple key technical levels
yesterday and shows little tendency to rebound," Phillip Futures
analysts wrote in a note. "We expect prices to consolidate
briefly but remain pressured to make new lows below $1,180.71." 
 
    SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, said its holdings fell 3.90 tonnes to
808.72 tonnes on Thursday, the lowest in nearly five years.
 
    Outflows from the top eight gold ETFs have totalled about
720 tonnes as investors channel more money to equities.  
    Physical demand failed to pick up in a big way despite the
drop in prices, another sign that consumers expect more price
falls.
    
    PRICES AT 0731 GMT
 Metal                Last       Change   Pct chg  YTD pct chg
                                                               
 Spot gold               1192.8      3.2     0.27        -28.77
 Spot silver              19.16    -0.08    -0.42        -36.72
 Spot platinum          1318.75     3.75     0.29        -14.09
 Spot palladium             697     3.25     0.47          0.72
 Comex gold Dec3         1192.5     -1.1    -0.09        -28.84
 Comex silver Dec3        19.15    -0.03    -0.19        -36.82
 Euro                    1.3629                                
 DXY                      80.77                                
                                                               
 COMEX gold and silver contracts show the most active months
 
 (Reporting by A. Ananthalakshmi; Editing by Joseph Radford and
Anand Basu)

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