Tag Archives: Fed

Gold tumbles again, could see worst week in 30 years

21 Jun

Gold fell to a three-year low on Friday and was in danger of recording its biggest weekly drop in 30 years after the US Federal Reserve said it would wind down its bullion-friendly stimulus later this year.

Spot gold – down nearly 9 percent this week – dropped for the fifth straight session, while Comex gold futures also declined over 1 percent to their lowest in three years.

Fed Chairman Ben Bernanke said on Wednesday the central bank would taper its USD 85 billion monthly bond buying programme as the US economy was recovering strongly, ending purchases around mid-2014 if economic growth held up.

“What the market is undergoing now is a state of normalisation, going back to pre-stimulus times,” said Joyce Liu, investment analyst at Phillip Futures in Singapore.

“Since the first stimulus programme in 2009, markets have jumped despite fundamentals not justifying such a spike.”

Gold was also hurt by CME Group Inc’s move to raise initial margins for Comex gold after prices plunged over 6 percent on Thursday.

The exchange operator raised Comex 100 Gold Futures initial margins for speculators by 25 percent to USD 8,800 per contract from USD 7,040.

“That is definitely affecting gold too. For those who cannot put out margin calls on time, they will be squeezed out even when they don’t want to get out,” said Liu.

Until recently, gold – seen as a hedge against inflation – had gained as the global economy took a hit and central banks acted to boost their economies. Gold touched an all-time high of USD 1,920.30 in 2011.

Spot gold was down 0.5 percent at USD 1,271.16 an ounce by 0121 GMT on Friday. The metal fell to USD 1,269.04 earlier – its lowest since September 2010 and a level which would mark the worst weekly decline in 30 years.

It has lost 24 percent of its value this year, after recording 12 years of gains.

Gold is on weak technical ground and will fall below USD 1,200 an ounce before finding support, technical analysts said.

UBS lowered its 2013 gold price outlook by 10 percent to USD 1,440 an ounce, and its 2014 forecast to USD 1,325 an ounce from USD 1,625.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.42 percent to 995.35 tonnes on Thursday – the lowest in more than four years.

But the drop in prices could see a spurt in physical demand in top consumers India and China, which have been quiet recently.

However, Liu said the demand would not be as strong as April when gold prices fell the most in 30 years over just two days.

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Gold marks time as investors await stimulus outlook

17 Jun

Gold held steady in Asian trading on Monday as investors awaited indications from a key US Federal Reserve meeting later this week on the outlook for the central bank’s bond buying programme.

The Fed meets on June 18-19 against a backdrop of stronger-than-expected data on US retail sales and the job market, with markets looking for clues to any tapering of its economic stimulus programme.

“The markets are a little bit fatigued at the moment,” said Victor Thianpiriya, commodities analyst at Australia and New Zealand Banking Group. “They are still looking for direction from the Fed meeting. That’s clearly the big driver this week.”

Spot gold rose 0.02 percent to $1,390.41 an ounce by 0319 GMT. Bullion closed up about 0.5 percent for the week on Friday helped by strong demand for coins and bars, a pullback in U.S. stocks and rising tensions in the Middle East.

US gold rose USD 2.40 to USD 1,390.

Markets have been volatile since Fed Chairman Ben Bernanke said last month the bank could scale back its stimulus measures if the economy improves. A cut in the Fed’s USD 85 billion monthly bond purchases could hurt gold, which has benefitted from its role as a hedge against inflation.

Thianpiriya said Bernanke was unlikely to deviate from what he has said before, as it was still too early to determine the timing of the tapering down of the bond purchases.

Most economists expect the Fed to scale back the size of its bond purchases by year end, and several expect reduced buying as early as September, a Reuters poll showed.

DEMAND EASING

Gold prices were supported by some buying in China, the No. 2 bullion consumer in the world after India. Shanghai gold futures were up 0.4 percent on Monday.

However, demand in Asia has cooled from peak levels seen after the mid-April sell-off in gold. Bullion is down 17 percent for the year after 12 years of annual gains.

Indian purchases of gold have fallen since an import duty hike earlier this month. The government is trying to narrow its current account deficit by reducing gold imports.

ANZ’s Thianpiriya said volumes to India have fallen significantly in the last two weeks, while those to China were little changed.

Hedge funds and money managers slashed their bullish bets in gold and silver futures and options in the week to June 11, a report by the Commodity Futures Trading Commission showed on Friday.

Gold output in Australia, the No. 2 producer behind China, fell 5 percent in the first quarter on weather-related disruption to 63.5 tonnes, according to the latest Gold Quarterly Review by Surbiton Associates.