February 21, 2013 / 11:30 AM / 7 years ago

PRECIOUS-Gold up as data boosts Fed stimulus hope after drop

* Raft of US economic indicators point to tepid recovery
    * SPDR gold fund reports biggest 1-day outflow in 18 months
    * COMEX open interest down a tad despite sell-off
    * Coming up: U.S. CFTC Commitments of Traders report Friday

    By Frank Tang
    NEW YORK, Feb 21 (Reuters) - Gold rose nearly 1 percent on
Thursday as lackluster U.S. economic data boosted hopes that the
Federal Reserve will maintain its monetary stimulus, allaying
fears that the U.S. central bank may stop buying assets soon.
    Thursday's economic reports from claims for jobless aid to
factory activity and consumer prices pointed to a still tepid
recovery, supporting the argument that the Fed should continue
its buying of $85 million in bonds per month to stimulate
    An increasingly divided Fed on whether it should halt its
stimulus program, evidenced by the minutes of the Fed Open
Market Committee (FOMC) meeting in January, weighed heavily on
gold's inflation-hedge appeal. 
    Signs of an improving U.S. economy have diminished gold's
traditional status as a safe haven against economic uncertainty.
The price of gold has dropped almost 10 percent from a high
above $1,700 an ounce in early December.
    "I am a buyer on dips right now. The sell-off was overdone
as we lost almost $100 from just last week," said COMEX gold
option floor trader Jonathan Jossen.
    Spot gold rose 0.9 percent to $1,576.51 an ounce by
3:18 p.m. EST (2018 GMT), rebounding sharply from a seven-month
low of $1,554.49.
    U.S. gold futures for April delivery settled up 60
cents at $1,578.60, with trading volume about 20 percent above
its 250-day average, preliminary Reuters data showed. 
    Gold's 14-day relative strength index had briefly fallen to
around 18 on in the previous session before a sharp rebound to
26 on Thursday. A market is generally considered oversold when
the RSI drops below 30.
    Gold tumbled 2.5 percent on Wednesday to its lowest price
since July after the FOMC minutes and rumours that a large
commodity hedge fund had been forced to liquidate its holdings.
    The open interest of COMEX gold futures, however, was down
only 0.1 percent on Wednesday, exchange data showed. Traders
said it was unlikely that the sell-off was triggered by a
troubled fund's forced selling.
    Jeffrey Sica, chief investment officer of SICA Wealth, said
that he expects some hedge funds to sell more gold in response
to an increase in redemption requests from clients.
    A spike in gold price volatility also prompted retail
investors to reduce their bullish bets on gold.
    SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, reported an outflow of around 20 tonnes,
or 1.5 percent, to about 1,299 tonnes, marking its biggest
one-day drop in 18 months on Wednesday. 
    A mixed bag of signals from top Fed officials failed to give
a clear indication about how long the Fed should continue its
extraordinary measures to support the economy. 
    Hopes of improving economic conditions for 2013 and beyond
has hit gold prices, but economic and political uncertainty,
particularly in the United States and Europe, should underpin
prices, said Carlos Sanchez, director of commodities and asset
management at CPM Group.
    Among other precious metals, silver rose 0.4 percent
to $28.64, having hit a six-month low of $28.26 an ounce in he
previous session. 
    Platinum was down 2 percent to $1,610.99 an ounce,
while palladium fell 0.9 percent at $730.97 an ounce.
 3:18 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold APR   1578.60   0.60   0.0  1554.30 1584.40  203,058
 US Silver MAR  28.699  0.077   0.3   28.290  28.880   71,237
 US Plat APR   1620.00 -27.10  -1.6  1599.00 1652.10   22,297
 US Pall MAR    733.60  -2.80  -0.4   708.30  742.25   11,935
 Gold          1576.51  14.22   0.9  1555.71 1584.50         
 Silver         28.640  0.110   0.4   28.350  28.880
 Platinum      1610.99 -33.26  -2.0  1602.75 1649.50
 Palladium      730.97  -6.53  -0.9   712.50  741.00
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        214,423   192,650   173,209     16.05    0.98
 US Silver      101,096    53,165    52,552     25.14    1.96
 US Platinum     22,675    14,230    11,165     17.37    0.05
 US Palladium    16,890     6,077     4,813
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