Gold hits 7-month low
Singapore, February 21, 2013
Gold dropped to a seven-month low on Thursday, its third straight session of weakness, as signs that some Federal Reserve officials were reconsidering the scale and duration of the US monetary stimulus programme spooked investors.
Spot gold dropped as much as half a percent to $1,554.49, its lowest since July. It had since pared some losses to $1,560.66 by 0252 GMT. It fell 2.6 percent on Wednesday, posting the biggest daily drop in a year.
US gold fell to a more than seven-month low of $1,554.3 earlier in the day, and recovered to $1,560.40.
Technical analysis suggested spot gold could extend losses to $1,538-$1,548 an ounce during the day, as indicated by its wave pattern, said Wang Tao, Reuters market analyst.
A number of Fed officials think the central bank might have to slow or stop buying bonds before seeing the pickup in hiring the program is designed to deliver, according to minutes of the central bank's policy meeting last month which were released on Wednesday.
The Fed's three rounds of quantitative easing played an essential role in gold's record-breaking rally in recent years, as the metal's inflation-hedge appeal attracted investors worried about currency debasement as a result of rampant cash printing by central banks.
But the sentiment started to shift late last year when signs emerged that the US economy started to recover, raising doubts on the necessity of large-scale quantitative easing and cooling sentiment in gold.
"It is all about the Fed," said a Shanghai-based trader, "Physical material buyers may jump in at this level, but investors are mostly cautiously watching the next move."
The next level of support for gold will be around $1,527, the lowest in 2012, he said.
A firmer dollar added to the pressure. The dollar index jumped to a three-month high in the previous session, weighing on dollar-priced commodities as a stronger greenback makes them more expensive for buyers holding other currencies. - Reuters