Morning: Gold Back From a 5-Week High on Improved Dollar


(Reuters) – On Tuesday, gold slightly lower as the dollar improved, holding back from a 5-week high as investors began to factor in outlooks that the U.S. Federal Reserve would continue its stimulus measures until early 2014.

The Fed starts a 2-day policy meeting on Tuesday in which it is highly predicted to approve it will stay on its buying bonds at the rate of $85 billion a month.

Many economists are certain of the Fed can push tapering to early next year.

Spot gold declined 0.5% to $1,344.64 an oz by 1104 GMT. It hit its highest since September 20 at $1,361.60 in the prior session, maintained by weak U.S. data strengthening the outlook that the U.S. economy is not yet strong that the Fed to begin tapering monetary stimulus.

U.S. gold December futures for delivery decreased by $7.30 an oz at $1,345.10.

The London A.M. fix is $1,346.75.

The dollar moderately improved against other major currencies, given some help from stabilization in U.S. Treasury yields over 2.5%.

Revenues from U.S. bonds are carefully observed by the gold market as the yellow metal pays no interest.

Gold prices have dropped around 20% this year in the prospects of impending tapering by the Fed, but a budget combat in Washington and a sequence of weaker than expected economic data have increased questions around whether it will reduce monetary stimulus, giving bullion an improvement. The yellow metal has added 8% over the past two weeks.

Physical Demand

However a long period of easy money can upkeep gold, physical demand may take a hit because of the higher prices. Asia gold demand has been quiet for a period of time.

ANZ analysts noted “We continue to view gold as precariously placed, while physical demand for the metal remains soft,” and also added “We viewed the metal as overbought above $1,340 on the back of weak demand from China and continued ETF selling.”

SPDR Gold Shares, the world’s largest gold-backed exchange-traded fund (ETF), holdings stayed unchanged at 872.02 tonnes on Monday after dropping 4.5 tonnes on Friday.