August 8, 2012 / 12:56 AM / in 5 years

Gold edges up, trade thin as market watches central banks

NEW YORK (Reuters) - Gold inched up on Wednesday, but remained in a tight range as trading was quiet again due to investor uncertainty about whether central banks would act to stimulate frail economies.

Comments from Bank of England Governor Mervyn King saying there was no urgent need to print more money disappointed bullion investors hoping for stimulus actions from central banks.

Traders said the gold market was still wondering whether the U.S. Federal Reserve and the European Central Bank will use monetary stimulus, which could encourage gold buying, or refrain from further action, which will probably spur selling.

Volume in U.S. gold futures was weak for a third consecutive day. Nearly flat performance in U.S. equities and crude oil failed to inspire a further rally in the metal.

“There appears to be little investor enthusiasm to push gold prices in any clear direction. A dearth of important economic releases this week and thin summer turnover may leave gold trading in a near-term no-man’s land,” said James Steel, HSBC’s chief commodity analyst.

Spot gold inched up 0.1 percent at $1,612.35 an ounce by 2:28 p.m. EDT (1828 GMT), recovering from losses earlier in the session.

U.S. gold futures for December delivery settled up $3.20 an ounce at $1,616, with volume at around 40 percent below its 30-day average, preliminary Reuters showed.

Volume and volatility should stay low until the end of the month when a central bankers’ meeting will be held at Jackson Hole, Wyoming, where Fed Chairman Ben Bernanke might drop a hint about possible easing, TD Bank strategists said in a note.

Implied volatility for at-the-money gold call options hovered at 14, near a one-year low. Traders said, however, the metal looked set for a rebound rally, with volatility set to climb back to the normal level at around 20.

WEAK INDIAN DEMAND, MONSOON IN FOCUS

Physical buying in gold, however, remained disappointing.

Gold demand in major consumer India was soft at the start of the festival season, with rural buyers on the sidelines, holding on to cash at a time when deficient monsoon rains threaten to dent incomes.

The rural population accounts for 60 percent of the gold demand from India, where a weak rupee has already hit gold buying, keeping local prices high. A hike in import taxes aimed at cutting the trade deficit has also crimped gold buying.

In China, vying with India as the world’s top gold buyer, the trading volume on the popular gold spot deferred contract on the Shanghai Gold Exchange was down nearly 30 percent from July’s average daily volume.

Among other precious metals, silver was down 0.1 percent at $28.03 an ounce, while of the platinum group metals, platinum edged up 0.1 percent at $1,403.75 an ounce and palladium gained 0.5 percent to $582.70 an ounce.

Additional reporting by Jan Harvey in London; Editing by Bob Burgdorfer and David Gregorio

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