ZN:Gold price falls 1 percent on Fed worries; equities steady
New York/London: Gold fell around 1 percent on Monday, retreating from a two-month high earlier in the session, as a steadier U.S. equities market and jitters ahead of a key Federal Reserve meeting this week triggered profit taking.
The metal was weighed down by expectations that the Fed could trim monetary stimulus further from the $10 billion-a-month reduction to its bond purchases decided in December. The Federal Open Market Committee is scheduled to begin its two-day policy meeting on Tuesday.
Bullion initially rallied toward $1,280 an ounce after data showed Chinese gold imports from Hong Kong surged to a record high in 2013.
However, the metal tumbled about $25, or 2 percent, from its high after U.S. equities pared early losses in New York afternoon trade, halting last week`s heavy pullback that had benefited gold. The S&P 500 index fell about 0.3 percent.
"Gold could fall further after a technical key reversal off its high earlier today," said Frank McGhee, head precious metals dealer at Chicago commodities brokerage Alliance Financial LLC.
Spot gold was down 1.2 percent at $1,253.69 an ounce by 3:35 p.m. EST (2035 GMT), having hit a two-month high of $1,278.01.
Last week, gold was up about 1 percent, its fifth consecutive weekly rise for the first time since September 2012.
U.S. COMEX gold futures for February delivery settled down 90 cents an ounce at $1,263.40, with trading volume about 10 percent above its 250-day average, preliminary Reuters data showed.
Year-to-date, gold is up more than 4 percent as slumping U.S. stock markets prompted investors increase their gold positions by selling equities.
A steadier gold market was reflected in falling option volatilities. The one-month at-the-money implied volatility was currently at 15, about half of its two-year high of 32 set in April 2013.
"The price of volatility is now low enough that investors can buy options to realize profits on movements," said COMEX gold option floor trader Jonathan Jossen.
CHINESE DEMAND EASES
China`s net gold imports from Hong Kong rose 24 percent in December from the previous month, the Hong Kong Census and Statistics Department said, bringing purchases for 2013 to a record 1,158 tonnes.
More positively for gold, India`s finance ministry said it will review its tight curbs on gold imports by the end of March.
Among other precious metals, silver was down 1.4 percent to $19.58 an ounce. Platinum fell 1.3 percent to $1,405.25 an ounce, while palladium dropped 1.9 percent to $718.10 an ounce.
