September 19, 2012 / 12:51 AM / 5 years ago

Gold flat near 6-1/2 month high, outperforms crude

NEW YORK (Reuters) - Gold ended nearly flat on Wednesday, hovering near a 6-1/2 month high hit in early trade, buoyed by monetary stimulus from the world’s major central banks despite pressure from another tumble in crude oil prices.

Gold Bullion from the American Precious Metals Exchange (APMEX) is seen in New York, September 15, 2011. REUTERS/Mike Segar

Turnover in U.S. gold futures was heavy after crude oil slid around 4 percent and the Bank of Japan earlier in the day joined other major central banks in easing monetary policy with a new round of asset buying. <ID:L4E8KJ05L>

“Amid the crude oil break, gold is holding on to a tight range. The metal is torn by an easier U.S. money policy and some caution about when the ECB is going to turn on the monetary spigot with its bond purchases,” said Stephen Platt, analyst at futures brokerage Archer Financial Services.

Earlier this month, the European Central Bank (ECB) launched its new and potentially unlimited bond-buying program, aimed at reducing crisis-hit euro zone countries’ borrowing costs. In the first week after the announcement, however, the ECB did not buy any government bonds.

Spot gold was down 0.1 percent at $1,769.90 an ounce by 2:01 p.m. EDT (1801 GMT), after hitting a 6-1/2 month high of $1,779.10, around $10 below the 2012 high of $1,790.30 reached in late February.

Last week, the Federal Reserve last week unveiled plans for a third round of bullion-friendly asset-purchase program called quantitative easing or QE3. The announcement sent the price of gold to a fourth consecutive weekly rise.

“While we expect QE3 to be supportive of gold prices, much will depend on how QE3 plays out in the fixed income markets and how it impact the euro-dollar,” said James Steel, metals analyst at HSBC.

Some have warned that gold may not rise as much during QE3 as it did during two earlier rounds of quantitative easing. (Past QE market reaction: link.reuters.com/pym62t)

U.S. crude oil futures fell for a third straight day as Saudi Arabian efforts to lower prices and a post-storm surge in U.S. crude inventories kept pressure on prices. <O/R>

A gold trader sells gold jewellery at his shop in Bombay November 18, 2004. REUTERS/Arko Datta

SHIFTING FOCUS

The Fed said last week it would buy $40 billion of mortgage-backed debt each month until the U.S. jobs outlook improved substantially, as long as inflation remained contained.

Market watchers said the shifting focus to employment was bullish for gold, a traditional inflation hedge.

U.S. COMEX gold futures for December delivery settled up 50 cents an ounce at $1,771.70. Trading volume was about 10 percent above its 30-day average, preliminary Reuters data showed.

Interest in gold exchange-traded funds - popular investment vehicles for bullion which issue securities backed by physical metal - has been strong this week, with gold ETF holdings rising to an all-time high at 73.681 million ounces.

Among other precious metals, silver was down 0.7 percent at $34.52 an ounce, while platinum group metals rebounded from the previous session’s sharp pullback.

On Tuesday, platinum posted its biggest one-day fall since March, after striking miners at major South African platinum producer Lonmin said they would return to work after six weeks of labor unrest during which 45 were killed.

Spot platinum climbed 1.1 percent to $1,635.74 an ounce, and palladium was up 1 percent at $669.47 an ounce.

(Additional reporting by Jan Harvey in London; Editing by Theodore d‘Afflisio)

Frank.Tang@thomsonreuters.com; +1 646 223 6126; Reuters Messaging: frank.tang.thomsonreuters@reuters.net

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