October 24, 2012 / 2:15 PM / 7 years ago

PRECIOUS-Gold falls to $1,700/oz as Fed offers few surprises

* Fed renews pledge to keep stimulus until job market
improves
    * Deflation worries pressuring gold despite Fed's
bond-buying
    * Gold erases early gains on Chinese data
    * Coming up: US durable goods, weekly jobless claims
Thursday

 (Updates throughout after Fed statement, new comment)
    By Frank Tang
    NEW YORK, Oct 24 (Reuters) - Gold fell on Wednesday to just
above $1,700 an ounce, after the U.S. Federal Reserve stuck to
its plan to keep stimulating growth until the job market
improves but made few surprises in its policy statement. 
    The Fed also repeated its vow to keep rates near zero until
mid-2015 and its pledge to keep supporting growth while the
recovery strengthens. It also made no change to its plan
announced in September to buy $40 billion in mortgage-backed
debt per month to put interest rates down. 
    The metal, which briefly dropped below $1,700 an ounce
earlier in the session, has been pressured by worries about a
U.S. economic slowdown which also slammed equities and
commodities this week. Bullion, a traditional inflation hedge,
has lost 1.5 percent since Monday.
    "Gold is starting to adjust to the reality that there will
be deflation forces continue to assert themselves in the weeks
and months ahead," said James Dailey, a portfolio manager at
TEAM Financial Asset Management, which has $215 million in
assets.
    Even though the Fed's latest round of mortgage-bond buyback
should underpin gold prices in the long term, the U.S. central
bank cannot eliminate the risks for a global deflation, Dailey
said.
    Spot gold was down 0.3 percent at $1,703.20 an ounce
by 3:40 p.m. EDT (1940 GMT), after hitting a low of $1,698.70,
which marked the weakest price since Sept. 7.
    U.S. COMEX gold futures for December delivery settled
down $7.80 an ounce to $1,701.60, with trading volume at 20
percent below its 30-day average, preliminary Reuters data
showed.   
    Earlier Wednesday, bullion rose after a Chinese survey of
purchasing managers pointed to a modest recovery in October.
 
    Silver climbed 0.4 percent at $31.78 an ounce.
    Gold and other precious metals have come under heavy
pressure this week from worries about economic slowdown after a
raft of disappointing U.S. corporate earnings statements.    
    
    FEW SURPRISES
    The central bank's policy statement differed little from its
announcement last month in which it launched its latest
bond-buying program.
    "The committee remains concerned that, without sufficient
policy accommodation, economic growth might not be strong enough
to generate sustained improvement in labor market conditions,"
the Fed said in a statement after a two-day meeting.
    Gold hit a 2012 high on Oct. 5 at $1,795.69 on market
optimism after the Fed in September unveiled a third round of
mortgage-bond buybacks to stimulate economic growth. Some
analysts said that the initial optimism on Fed stimulus has
started to fade.
    Bullion also appeared to have lost momentum after repeatedly
failing to break the psychologically important $1,800 an ounce
level.
    Among platinum group metals, platinum slipped 0.7
percent to $1,556.99 an ounce, while palladium edged up
0.3 percent to $592.75 an ounce.
    Platinum hit a seven-week low and it has dropped 6.5 percent
in the last five sessions. Worries over global economic slowdown
and easing supply fears in top producer South Africa triggered
heavy liquidation, traders said.
 3:40 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1701.60  -7.80  -0.5  1698.70 1715.20  125,490
 US Silver DEC   31.62 -0.173  -0.5   31.535  32.055   36,406
 US Plat JAN   1562.70 -12.90  -0.8  1553.50 1586.10    9,058
 US Pall DEC    592.75  -1.10  -0.2   587.65  602.90    4,094
                                                               
 Gold          1703.20  -4.89  -0.3  1699.40 1714.06         
 Silver         31.780  0.120   0.4   31.560  32.020
 Platinum      1556.99 -11.50  -0.7  1556.50 1578.50
 Palladium      592.75   1.55   0.3   590.27  601.00
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        132,036   162,485   173,663     15.49    0.34
 US Silver       40,336    47,867    56,250        25  -10.00
 US Platinum      9,246    14,619     9,790     22.09   -0.18
 US Palladium     4,217     3,851     4,796                  
                                                               
 

 (Additional reporting by David Brough in London; Editing by
Jane Baird and Andrew Hay)
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