RTRS:PRECIOUS-Gold falls further on U.S. stimulus outlook, China worries
* Gold down after 1.2 pct drop on Monday
* Chinese stocks extend losses on liquidity fears
* SPDR holdings fall to fresh 4-year lows
(Updates prices)
By A. Ananthalakshmi
SINGAPORE, June 25 (Reuters) - Gold reversed early gains on
Tuesday as worries persisted over an early end to U.S. monetary
stimulus measures and a cash crunch in China, bringing the
metal's losses to more than 8 percent since the start of last
week.
Bullion had edged higher earlier in the Asian trading
session after two top U.S. Federal Reserve officials downplayed
an imminent end to monetary stimulus. But a lack of strong
buying interest and continued uncertainty pulled prices down.
"There is a lot of uncertainty in the markets. People are
waiting for prices to stabilize before buying," said a trader in
Hong Kong.
Gold prices have taken a beating since Fed Chairman Ben
Bernanke gave his most explicit signal yet last week that the
central bank was considering scaling back an $85-billion-a-month
bond purchase programme.
The precious metal has benefited in the past few years as it
was seen as a hedge against the Fed's inflation-inducing
policies.
Minneapolis Fed President Narayana Kocherlakota said on
Monday investors were wrong to view the central bank as having
become more keen to tighten policy, while another official said
the bank would be running an accommodative policy even if it
dialled back stimulus this year.
Spot gold fell 0.04 percent to $1,280.84 an ounce by
0704 GMT after rising to a session-high of $1,288.16 earlier.
Comex gold rose $3.50 to $1,280.60, not far from near
three-year lows hit last week.
"Price-sensitive buyers may wait for a well-defined bottom
before entering the market," HSBC analysts wrote in a note,
suggesting that the big drop in prices over the last six
sessions has not been enough to woo buyers.
HSBC on Monday cut its gold price forecast for 2013 and
2014, citing the Fed's wind-down plan and weak growth prospects
in China. Credit Suisse also cut its forecast on Tuesday.
Shanghai gold futures fell 0.3 percent on Tuesday,
indicating soft demand in the second-biggest bullion buyer after
India.
Chinese stocks extended losses even as money market rates
fell back towards more normal level as the central bank
signalled a slight softening in its crackdown on easy credit by
opting not to change the amount of cash in the market.
A slowdown in China could inflict another blow to gold,
which has seen a falling off in demand in India, where the
government is trying to curb gold imports to reduce its current
account deficit.
Holdings in SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, fell 0.43 percent to 985.73
tonnes on Monday - its lowest in over four years.
