Gold Rises as Investors Seek Fed Clarity

Gold prices held steady as dealers awaited clearer direction on the Federal Reserve's bullion-friendly monetary easing policy. The next policy meeting takes place early next week. The ultra-loose monetary policy was a key factor driving gold prices to record highs in recent years.

Published: Friday, 14 Jun 2013

Gold held steady near $1,385 an ounce on Friday and was on track to end the week little changed as dealers awaited clearer direction on the Federal Reserve's bullion-friendly monetary easing policy.

The Fed's next policy meeting takes place early next week. An array of firmer-than-expected U.S. data recently has fueled speculation it could be on track to rein in its $85 bullion monthly bond-buying program.

Spot gold was steady at $1,388 an ounce, having earlier dipped as low as $1,378, down 0.5 percent. Gold is little changed since last Friday, and has ended the last four weeks in a $10 range.

"(Gold) cannot break below $1,370 and cannot break above $1,420," Afshin Nabavi, head of trading at MKS, said. "There seems to be very good buying around the lows and good selling around the highs."

"The Fed meeting next week has kept a lot of people on the sidelines," he said. "We may have some moves next week after the FOMC (meeting)."

Ultra-loose monetary policy, especially in the United States, was a key factor driving gold prices to record highs in recent years. Uncertainty over how long this will last has made traders wary of chasing prices higher after their April crash.

The largest gold-backed exchange-traded fund, New York's SPDR Gold Trust said its holdings declined by another 6.3 tons on Thursday, bringing its total outflow for the year to nearly 350 tons.

"The constant outflows from the ETFs are bad news, and that hasn't been strongly offset yet by the net managed money positions, although they are turning up," Standard Chartered analyst Daniel Smith said.

"There's still an ambiguous picture from investors. People are worried about the withdrawal of quantitative easing."

Indian Demand Soft

Demand in India, the world's largest gold consumer, was muted after the wedding and festival season came to an end, traders said. It is due to re-start in August.

Silver was up 1 percent at $22 an ounce. Spot platinum was down 0.4 percent at $1,445 an ounce, while palladium was down 0.1 percent at $728 an ounce.

Platinum and palladium are set for their biggest weekly falls since a mid-April slide in precious metals prices as concerns over industrial action in major producer South Africa eased and after key technical levels were breached.

HSBC lowered its platinum price forecasts for this year and next, even though supplies are tight, citing the sharp sell-off in gold. The bank cut its 2013 average price forecast for platinum to $1,580 an ounce from $1,710 and reduced it for 2014 to $1,725 an ounce from $1,800.

The NewGold Platinum ETF launched by Absa Capital in late April, which already accounts for around 20 percent of total global platinum ETF holdings, said its holdings rose by nearly 16,000 ounces or 4.3 percent on Thursday.

"The rapid growth of this fund has been astounding as investors, recognizing the issues facing platinum supply, clearly seek to gain exposure to the metal in preference to the equities, most of which have fared poorly over the same time period," Investec said in a note on Friday.

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