August 20, 2013 / 2:46 PM / 4 years ago

PRECIOUS-Gold turns higher as dollar down ahead of Fed minutes

* Dollar, US Treasuries yield fall ahead of Fed minutes
    * Gold put options premium down, calls discount vanishes
    * US gold coins demand tumbles, Chinese India buying soft
    * Coming up: US existing home sales, FOMC minutes Weds.


    By Frank Tang and Zhe Sun
    NEW YORK/LONDON, Aug 20 (Reuters) - Gold prices rose on
Tuesday as the dollar weakened and U.S. Treasury bond yields
retreated on lingering uncertainty over when the Federal Reserve
will reduce its economic stimulus program.
    Gold fell almost 1 percent earlier in the session, then
turned higher as speculators bought futures to cover their
bearish bets ahead of Wednesday's release of the minutes of the
Fed's July policy meeting. 
    Silver also recovered after initially tumbling 4 percent.
    Traders said the uncertainty over when the U.S. central bank
will taper its $85 billion in monthly bond purchases benefits
gold, as bullion prices have already factored in the scaling
back of stimulus from as early as September.
    The metal has gained 8 percent over the last two weeks. This
has helped turn the gold option market less bearish with the
high volatility premium on puts falling and some calls no longer
being offered at a discount. 
    "I have noticed a small reversal in call skew. People are
starting to bid for calls again and the discount is
diminishing," said Albert Ng, a market maker and portfolio
manager at Aurum Options Strategies in New York.
    Spot gold was up 0.5 percent at $1,372.67 an ounce by
1:44 PM EDT (1744 GMT), rebounding $20 from its low of
$1,352.20.
    U.S. Comex gold futures for December delivery settled
up $6.90 at $1,372.60 an ounce, with trading volume about 70
percent below its 30-day average, preliminary Reuters data
showed.
    Gold rose as the dollar index fell 0.4 percent, while
 the yield for 10-year U.S. Treasuries dropped from a two-year
high as investors scooped up relatively cheap U.S. government
debt.  

    PHYSICAL DEMAND SLOWS
    Demand for U.S. gold coins has plunged in recent weeks as
the unprecedented buying by retail investors that helped bullion
prices recover from their historic selloff four months ago has
almost vanished. 
    Gold buying from China and India, the world's largest
bullion consumers, also showed signs of slowing. 
    In India, traders said they will start importing gold again
over the next week, after the county's central bank clarified a
rule that stopped the flow of the precious metal into the
country at the end of July. 
    Silver was down 0.4 percent at $23.02 an ounce.
Platinum rose 0.8 percent to $1,514.24 an ounce, while
palladium eased 0.3 percent to $744.93 an ounce.
    
 1:44 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1372.60   6.90   0.5  1351.60 1378.00  127,119
 US Silver SEP  23.071 -0.095  -0.4   22.280  23.310   55,372
 US Plat OCT   1525.50  16.50   1.1  1496.70 1527.10    7,241
 US Pall SEP    749.65  -3.25  -0.4   743.35  756.45    3,561
                                                               
 Gold          1372.67   7.19   0.5  1352.20 1376.90         
 Silver         23.020 -0.100  -0.4   22.330  23.310
 Platinum      1514.24  11.94   0.8  1500.25 1523.50
 Palladium      744.93  -2.57  -0.3   747.00  753.97
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        132,857   189,833   189,713      23.3    0.25
 US Silver       70,977    51,004    53,203     34.11    1.11
 US Platinum      7,403     9,182    12,526     21.81    0.00
 US Palladium     5,139     4,089     5,271

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