* Hawkish tone in Fed minutes spooks investors
* Physical buying emerges, but is unable to lift prices much
* Spot gold may drop to $1,538-$1,548/oz - technicals
* Coming up: euro zone Markit manufacturing flash PMI; 0858
By Rujun Shen
SINGAPORE, Feb 21 Gold bounced on Thursday from
a seven-month intra-day low as physical buyers in Asia picked
bargains a day after the market was rattled by concerns the U.S.
Federal Reserve could scale back its monetary stimulus.
A number of Fed officials think the central bank might have
to slow or stop buying bonds before seeing the pickup in hiring
the program is designed to deliver, according to minutes of the
central bank's policy meeting last month which were released on
The Fed's three rounds of quantitative easing have played an
essential role in gold's record-breaking rally in recent years,
as the metal's inflation-hedge appeal attracted investors
worried about currency debasement as a result of rampant cash
printing by central banks.
But the sentiment started to shift late last year when signs
emerged that the U.S. economy started to recover, raising doubts
on the necessity of large-scale quantitative easing and cooling
sentiment in gold.
"The market has seen some good economic data and is drawn to
the question when central banks, especially the U.S. central
bank, will start the exit strategy, which is clearly not a good
thing for gold," said Jeremy Friesen, commodity strategist at
Societe Generale in Hong Kong.
Friesen said the recent selloff in gold was premature given
that central banks are likely to stay accommodative through
2013, which will give support to gold.
"U.S. unemployment will remain very high in 2013 and Europe
still has significant economic challenges as well as policy
challenges despite the fact that things are getting better.
There is going to be slow growth and central banks will have to
continue to keep the economies on life support," he added.
Spot gold dropped as much as half a percent to
$1,554.49, its lowest since July. It had since reversed course
to post a rise of 0.2 percent to $1,565.06 by 0618 GMT. It fell
2.6 percent on Wednesday, posting the biggest daily drop in a
U.S. gold fell as much as 1.5 percent to a more than
seven-month low of $1,554.3 earlier in the day, and recovered to
A firmer dollar, though, created pressure. The dollar index
jumped to a three-month high on Thursday, weighing on
dollar-priced commodities as a stronger greenback makes them
more expensive for buyers holding other currencies.
Technical analysis suggested spot gold could extend losses
to $1,538-$1,548 an ounce during the day, as indicated by its
wave pattern, said Wang Tao, Reuters market analyst.
The relative strength index (RSI) on spot gold hovered
around 20, suggesting the market had been heavily oversold.
Tumbling prices attracted buying interest in the physical
market, but the buying was barely enough to offset speculative
"There is a lot of physical buying in the region but the
amount is not big enough," said Brian Lan, Managing Director at
GoldSilver Central Pte Ltd in Singapore.
"People are more looking into stocks which are giving better
returns, compared with gold which doesn't give any."
The S&P 500 index has risen about 6 percent so far
this year, compared with gold's year-to-date decline of over 6
Holdings of SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, slumped 1.57 percent from the
previous session to 1,299.164 tonnes on Feb 20, the lowest in
more than five months.
Spot silver fell 0.2 percent to $28.48 an ounce,
having fallen to a six-month low of $28.26 in the previous
Spot platinum extended losses to the third straight
session, down 1 percent to $1,628.24. Spot palladium fell
1.4 percent to $727.22, after falling more than 3 percent in the
previous session -- its sharpest daily decline in nearly four
Anglo American Platinum (Amplats) said persistent
labour unrest was jeopardising investment in South Africa and
warned that talks with government and unions may not lead to a
reduction in its planned job cuts.
Precious metals prices 0618 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1565.06 2.77 +0.18 -6.54
Spot Silver 28.48 -0.05 -0.18 -5.94
Spot Platinum 1628.24 -16.01 -0.97 6.07
Spot Palladium 727.22 -10.28 -1.39 5.09
COMEX GOLD APR3 1565.10 -12.90 -0.82 -6.61 42871
COMEX SILVER MAR3 28.47 -0.15 -0.53 -5.82 10561
COMEX gold and silver contracts show the most active months