(Reuters) – Gold recovered some lost ground on Friday as Chinese buyers were attracted by low prices and Asian stocks falling.
After the U.S. Federal Reserve had said it might “ease on the gas” and slow the stimulus rate, gold price fell sharply and experience its worst week in two-years. Ben Bernanke, the Fed Chairman, said the U.S. economy is strong enough to slow the pace of bond purchasing program.
The world second largest consumer, China, witnessed a remarkable demand on gold bullions on Friday as stocks extended its losses to 9-months low, traders said.
Analysts in Singapore expect a correction in the gold price. They believe that U.S. stimulus supported gold prices since 2008, and gold is moving back to “pre-stimulus times”. “The market jumped despite fundamentals not justifying such a spike”, said Joyce Liu, investment analyst at Phillip Futures in Singapore.
In 2011, gold touched all-time high of $1,920.30 because gold was seen until recently as a hedge against inflation. Gold price fell by 7% this week alone and 23% this year on stimulus withdrawal fears.
Gold price in the spot market rose by 1.5% on Friday morning due to Asian demand. Comex gold futures for August delivery recovered 0.8% of the 1% loss on Friday. SPDR Gold Trust, the largest gold-backed ETF in the world, holdings declined by 0.4% to reach 995.35 tonnes on Thursday, the lowest in 4 years.
Asian buyers from India and China capped gold losses in April’s slump. The gold price crash with the sharpest decline in 30 years after 12-years gold price bull-run initiated market frenzy in Asia, Europe, Australia and America. Kilo-bars premiums recorded an all-time high in April and May, and stores were out of gold to sell. Demand from India slowed in recent weeks due to the severe control measures taken to curb gold imports and reduce the current account-deficit.