Precious Gold drops close to $1,300 on stronger dollar, stimulus worries

by **Cals** Thu 10 Oct 2013, 17:25

Precious Gold drops close to $1,300 on stronger dollar, stimulus worries

Business & Markets 2013

Written by Reuters

Thursday, 10 October 2013 14:41

SINGAPORE (Oct 10): Gold was barely holding above $1,300 an ounce on Thursday on signs the Federal Reserve may trim its stimulus measures this year and as the dollar rebounded after President Barack Obama began meetings with lawmakers to resolve the U.S. budget crisis.
Safe-haven buying, seen in the last few sessions as a result of the U.S. government shutdown, evaporated as the dollar climbed off eight-month lows, also helped by the nomination of Janet Yellen as the next Fed chief.
Physical buying failed to pick up despite the lower prices, raising questions about what could support gold prices after the U.S. budget impasse is resolved.
"The fact that gold is not going up even with the shutdown is a bad sign," said Yuichi Ikemizu, branch manager for Standard Bank in Tokyo.
"The mood in the market is bearish." "Even at this $1,300 level we don't see much physical buying. It doesn't look too good for gold."
Spot gold had fallen 0.05 percent to $1,306.00 an ounce by 0625 GMT, after losing around 1 percent the session before.
Platinum gained nearly 1 percent as South African mine strikes threatened to hurt supply.
Gold has fallen about 22 percent this year on fears the Fed would start cutting back its $85 billion bond purchases as the U.S. labour and housing markets showed some growth.
The central bank stunned markets last month when it decided not to taper.
However, minutes from the September policy meeting released on Wednesday showed that the Fed's decision last month was a "relatively close call" for policymakers and there was still broad support to trim bond-buying this year.
The U.S. shutdown and concerns over the debt ceiling deadline should have typically pushed up prices, but gold is still trading below pre-shutdown levels of about $1,340.
"How the U.S. dollar moves in the near term may provide direction for gold," HSBC analysts said in a note.
"It is possible that investors move into Treasuries as a safe haven despite the possibility of U.S. default. This could reduce yields and bolster the dollar but detract from gold." - Reuters