Gold slips after Bernanke hints at slowing bond purchases

Business & Markets 2013
Written by Reuters
Thursday, 23 May 2013 12:31
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(May 23): Gold fell for a third straight session on
Thursday after U.S. Federal Reserve Chairman Ben Bernanke hinted at
reducing an $85 billion bond-buying programme, which has increased
the precious metal's appeal as a hedge against inflation.
While Bernanke said the central bank needs to see further progress in
the U.S. economy before the Fed scales back monetary stimulus, he
also added that a decision to adjust it could come in the "next few
meetings" if the economy looked set to maintain momentum.
Down nearly 20 percent this year, gold could come under more selling
pressure as investors increasingly price in a stimulus cut ahead of the
Fed's next policy meeting on June 18-19.
Spot gold fell 0.06 percent to $1,367.66 an ounce by 0327 GMT. It hit a
low of $1,356.24 earlier in the session, near a two-year low of
$1,321.35 plumbed in April.
"It does not matter if the tapering off (of the bond buying) is in this
quarter or next or delayed by six months," said Dominic Schnider, an
analyst at UBS Wealth Management.
"If you know it's tapering off anyhow in the next 12 months, people do
not want to be in there anymore."
Sustained outflows from exchange-traded funds also point to more
downside for gold prices.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.3 percent to 1,020.07 tonnes on
Wednesday, the lowest in more than four years.
U.S. gold futures eased 0.06 percent to $1,366.60 an ounce. Spot silver, platinum and palladium tracked gold lower.
Demand concerns
China's factory activity shrank for the first time in seven months in May as new orders fell, a preliminary survey of purchasing
managers showed, adding to concerns that a recovery in the world's second-largest economy and No. 2 gold consumer is
sputtering.
The contraction is an "alarming sign", said UBS' Schnider at a time when physical gold demand in Asia has been normalising.
Premiums for gold bars hit a record high in Asia on Wednesday as lower spot prices lured more buyers, mainly in China, amid
tight physical supplies.
Top gold buyer India, which had seen gold imports jump 138 percent in April, is facing a slowdown as the peak wedding
season comes to an end and its central bank imposes new rules to reduce a deficit.