RTRS:PRECIOUS-Gold firms for third day ahead of Fed tapering decision
* Gold holds up despite strong U.S. data, SPDR outflows
* Investors adjusting from strong short positions support
prices
* Fed's two-day policy meeting begins Tues
(Updates prices)
By A. Ananthalakshmi
SINGAPORE, Dec 17 (Reuters) - Gold inched up for a third
session on Tuesday, supported by a short-covering rally, even
though investors were nervous ahead of a Federal Reserve polciy
decision on whether to begin tapering its bullion-friendly
stimulus measures.
Gold has lost over a quarter of its value this year as fears
that the Fed will scale back its $85 billion monthly bond
purchases brought a 12-year bull market to an end.
Most economists believe the Fed will not begin tapering till
March of next year, which could be prompting bullion investors
to cover positions. The Fed will issue a statement on Wednesday,
at the end of its two-day meeting.
"I think this short-covering rally we have seen recently
could be bigger if the Fed doesn't make a move tomorrow," said a
Hong Kong-based precious metals trader."Short positions are at
multi-year highs and the outflows from exchange-traded funds are
still high. Clearly the mood is still bearish."
Spot gold had risen 0.7 percent to $1,245.90 an ounce
by 0756 GMT, while silver climbed nearly 1 percent.
Bearish bets by hedge funds and money managers in U.S. gold
futures and options are close to a 7-1/2 year high, according to
data from the Commodity Futures Trading Commission.
"Post the FOMC meeting, we are more favourable towards gold
given recent COMEX data, which show that speculators still hold
significant short positions on gold. The approaching year-end
may lead to a covering of spec shorts, which is price
supportive," HSBC analysts said in a note.
SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, said its holdings fell 8.70 tonnes to
818.90 tonnes on Monday - its biggest outflow since Oct 21.
Holdings are at their lowest since January 2009 after more
than 450 tonnes of outflows this year caused by investors
channelling money towards risky assets such as equities.
PRICES AT 0756 GMT
Metal Last Change Pct chg YTD pct chg
