* Volatility to increase ahead of Fed meet next week
* Chinese gold premiums ease further on slowing demand
* Asian shares subdued, dollar index near 2-month high
By A. Ananthalakshmi
SINGAPORE, Jan 22 Gold was trading near its
lowest in a week on Wednesday, after sharp overnight losses on
speculation about further cuts to U.S. stimulus measures and an
improving outlook for the global economy.
Investors are turning away from putting new money into gold
as the recovery in the international economy, led by the United
States, is boosting stock markets and hurting the metal's appeal
as a safe-haven investment.
Gold started 2014 on a positive note but worries over
stimulus cuts, which weighed on prices last year, are catching
The Federal Reserve holds its next policy meeting on Jan.
28-29 when markets think the U.S. central bank will announce a
second cut to its $85 billion monthly bond purchases, which had
burnished gold's inflation-hedge appeal.
"We think volatility will increase markedly next week
heading into the Fed policy statement," said INTL FCStone
analyst Edward Meir.
Spot gold was little changed at $1,239.80 an ounce by
0718 GMT, after falling nearly 1 percent on Tuesday - its
biggest one-day decline this year.
Further hurting bullion, the International Monetary Fund
raised its global growth forecast for the first time in nearly
two years, saying fading economic headwinds should permit
advanced nations to pick up the mantle of growth from emerging
Traders said prices could fall further as Chinese physical
purchases were also slowing.
Chinese premiums eased to $12 an ounce on Wednesday from $13
in the previous session. Premiums were higher earlier in the
year on strong demand for the Lunar New Year holiday.
Platinum was trading flat at $1,448.20, close to its
near three-month peak, as strikes were set to begin from
Thursday at the South African mines of top producers.
The move could hit over half of global output of the
precious metal and bosses of the world's top three platinum
producers accused South Africa's AMCU union of making
"unaffordable and unrealistic" demands.
Despite the metal's recent gains, HSBC analysts said the
reaction has been subdued.
"A mining strike in South Africa would historically be
bullish for the PGMs (platinum group metals) but the muted
reaction more recently to the announcement for a possible strike
may be due to investor awareness of producer stockpiling ahead
of the wage negotiation period last year," the analysts said in
PRICES AT 0718 GMT
Metal Last Change Pct chg
Spot gold 1239.8 -1.31 -0.11
Spot silver 19.8 -0.05 -0.25
Spot platinum 1448.2 -0.55 -0.04
Spot palladium 742.4 -1.5 -0.2
Comex gold 1240 -1.8 -0.14
Comex silver 19.84 -0.03 -0.15
COMEX gold and silver contracts show the most
(Reporting by A. Ananthalakshmi; Editing by Ed Davies, Joseph
Radford and Subhranshu Sahu)