ET:Gold eases despite Fed as investors take profits
SINGAPORE: Gold slipped to one-week lows on Thursday despite the US Federal Reserve vowing to maintain its economic stimulus measures, with investors taking profits from a recent run-up in prices.
The metal had risen about 8 per cent since hitting a three-month trough on Oct. 15 in anticipation of the Fed's decision, leading to a price correction on Wednesday after a statement from the bank came in line with expectations.
Gold was also hurt by a sharp slide in silver due to technical selling and strength in the US dollar.
"Prices are under pressure as some are liquidating their long positions because there was nothing new from the meeting," sad Peter Fung, head of dealing at Hong Kong's Wing Fung Precious Metals.
"Prices rose quickly from $1,300 to $1,360 in anticipation of the Fed move - that is why investors are taking profits now."
In a span of about 4 weeks, gold prices rose to a five-week high of $1,360 last week from $1,280.
Spot gold was down 0.6 per cent at $1,334.59 an ounce by 0731 GMT, after falling to $1,333.04 earlier - its lowest since Oct. 24.
Comex gold futures slipped 1 per cent to a one-week low of $1,332.70, while silver dropped nearly 3 per cent.
The Fed on Wednesday sounded a bit less optimistic about economic growth as it announced plans to keep buying $85 billion in bonds per month. The central bank noted that the recovery in the housing market had lost some steam and suggested some frustration at how slowly the labour market was healing.
"With this event risk now behind us, the market will go back into data-watch mode," said Victor Thianpiriya, an analyst at ANZ. "For gold, the intraday moves will continue to be driven by gyrations in the US dollar."
"We expect the slowing of physical demand and the decline in Shanghai premiums will mean gold prices will have to fall further before sparking any strong end-user demand."
Physical buying in Asia, especially China, has slowed in recent weeks with the rise and volatility in prices.
Prices on the Shanghai Gold Exchange have trended lower than global prices due to fears of a cash crunch.
