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Rediff.com  » Business » Gold extends gains as stocks, dollar tumble

Gold extends gains as stocks, dollar tumble

Last updated on: June 13, 2013 10:23 IST

Gold extends gains as stocks, dollar tumble

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A Ananthalakshmi in Singapore

Gold extended gains into a second session on Thursday, as Asian stock markets fell sharply and the US dollar fell to four-month lows on persistent uncertainty over the Federal Reserve's massive stimulus programme.

Investors were still weighing the Bank of Japan's decision on Tuesday to leave its policies unchanged and Standard & Poor's Monday upgrade of the US credit outlook, viewing the moves as a sign of economic recovery and a trigger for the US Fed to end its $85-billion monthly bond purchases.

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Image: Customers look at gold accessories at a gold store in Jinan, Shandong province.
Photographs: Reuters

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Gold extends gains as stocks, dollar tumble

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"The sentiment is still very divided over whether the Fed will taper or not," said Joyce Liu, an investment analyst at Phillip Futures in Singapore.

"Due to the lack of major market-moving events, people are just trading on technicals until some senior Fed officials say something before the FOMC meeting next week," she said, referring to the Federal Open Market Committee.

Markets will watch the policy meeting on June 18 and 19 for clues to a rollback of stimulus measures.

Fed officials are divided over their ultra-easy monetary policy and some warn it could stoke future inflation and financial instability.

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Photographs: Reuters

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Gold extends gains as stocks, dollar tumble

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Most economists expect the Fed to scale back the size of its bond purchases by the end of the year, and several expect reduced buying as early as September, a Reuters poll showed.

Spot gold rose 0.4 per cent to $1,393.91 an ounce by 0251 GMT.

It closed up on Wednesday after earlier losses, as U.S. stock markets dropped sharply.

US gold was up slightly at $1,393.50.

Spot gold is expected to test a resistance at $1,402 per ounce, a break above which will lead to a further gain to $1,410, Reuters technical analyst Wang Tao said.

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Photographs: Reuters
Tags: Reuters , Wang Tao , GMT , Fed , US

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China factor

Demand from major buyer China, which returned from a three-day holiday on Thursday, also propped up gold prices.

China, which had shut for the Dragon Boat festival, has been a big factor in holding up gold prices, even as demand in India, the biggest buyer of the precious metal, has cooled and investors have dumped holdings in exchange-traded funds.

Gold fell during Asian trading sessions this week due to the lack of buying from the second largest consumer of bullion.

Indian gold demand remained subdued, and importers and wholesalers struggled to sell supplies from May.

The government has raised the import duty on gold by a third and curbed gold financing by banks and others in an effort to cut its current account deficit.

 

 


Photographs: Reuters

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