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Gold Steady, Subdued By Fed Tapering Risk
Gold ingots of 999 purity, used for the production of gold medals for the 2014 Winter Olympic Games in Sochi, are seen at the Adamas jewellery factory in Moscow, June 28, 2013. PHOTO BY REUTERS/Sergei Karpukhin
By A. Ananthalakshmi
28/11/2013
SINGAPORE (Reuters) - Gold traded in a narrow range below $1,250 an ounce on Wednesday as strong United States housing data stoked fears the Federal Reserve would soon begin rolling back stimulus measures and reduce bullion's appeal as a hedge against inflation.
Permits for future U.S. home construction marked a near 5-1/2-year high in October and prices for single-family homes notched big gains in September, the latest signs of strength in the economy, which could prompt the Fed to reduce its monthly bond purchases of $85 billion soon.
Economists polled by Reuters expect the U.S. central bank to begin tapering only in March, but gold prices are subdued as some traders see a risk that the Fed could begin tapering in December.
"We still see some upward potential in the short to medium term as markets adjust tapering expectations," said Alexis Garatti, an economist at Haitong International Research in Hong Kong.
However, technical analysts warned that as long as gold remains below $1,300 it faces the risk of further declines.
Spot gold had ticked up 0.2 percent to $1,245.60 an ounce by 0717 GMT, after dropping 0.7 percent in the previous session.
If bullion cannot close above a resistance level at $1,260 an ounce in the next few days, prices may fall back, analysts from Wing Fung Financial Group said in a note.
The metal has fallen over 25 percent this year as investors pulled money out of bullion to invest in higher-yielding equities.
CHINESE DEMAND
China's net gold imports from Hong Kong hit the highest in seven months in October, data released on Wednesday showed, as banks and retailers stock up to meet demand ahead of the Chinese New Year in late January.
China is set to overtake India as the biggest gold consumer this year. Rules introduced by India in mid-year curbed demand for gold, the second largest item on its import bill after oil.
The Indian government took the steps in order to take pressure off the rupee's exchange rate and reduce a worryingly high current account deficit.
Chow Tai Fook Jewellery Group Ltd, the world's largest jewellery retailer by market value, posted a 92.3 percent rise in net profit for the six months ended in September, thanks to strong Chinese demand.
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