Singapore: Gold extended losses into a third session on Wednesday,
falling over 1 percent to trade below USD 1,300 an ounce, with investors
expecting the US Federal Reserve to announce a reduction in its
bullion-friendly stimulus measures.
The Fed is expected to begin
its long retreat from ultra-easy monetary policy by announcing a small
reduction to its USD 85 billion monthly bond purchases following a
two-day policy meeting that ends on Wednesday. Many expect a USD 10
billion cut.
Spot gold had fallen 1.2 percent to USD 1,293.69 an
ounce by 0217 GMT, bringing the year's losses to 23 percent. It had
earlier dropped to USD 1,291.34 - its lowest since August 8.
"It
all dependent now on the FOMC," said a precious metals trader in Hong
Kong, referring to the Federal Open Market Committee. "It depends on
what the language is going to be on their stimulus and what sort of
tapering they pursue."
"Gold is still technically under pressure and will probably struggle to go above USD 1,350 again."
Traders said prices would find their next support level at USD 1,270- USD 1,280 an ounce.
Gold,
often seen as a hedge against inflation and a slowing economy,
benefited when central banks around the world launched stimulus measures
to support their economies. The metal hit an all-time high of about
$1,920 an ounce in 2011.
But this year several analysts have cut
their forecasts for gold prices in anticipation of the US central bank
curbing its stimulus measures. Goldman Sachs expects prices to drop to
USD 1,050 by the end of next year.
PHYSICAL DEMAND
Due to
the volatility in prices, physical demand has failed to pick up rapidly
in key consumers India and China. Expectations that prices could fall
further once the Fed announces a cut in stimulus have also restrained
purchases.
Shanghai gold futures fell 2 percent on Wednesday.
Top
gold consumer India increased its import duty on gold jewellery to 15
percent from 10 percent, setting it higher than the duty on raw gold in a
move to protect the domestic jewellery industry.
The Indian
central bank and finance ministry have taken several steps this year to
curb bullion imports in an effort to reduce the country's record trade
deficit.
Silver and palladium dropped about 1.6 percent, while platinum fell nearly 1 percent.
