Morning Gold: Lower Gold, Stronger Dollar Ahead of Minutes

Gold Price

(Reuters) – On Wednesday, gold slightly lower, pressured from gains of the dollar and uncertainty on whether the U.S. Federal Reserve will start tapering its bullion-friendly economic stimulus measures next month.

Investors are waiting for the release of minutes of the Fed’s July meeting at 1800 GMT, which could give a sign of whether the Fed could start curbing its $85 billion monthly bond-buying program in September.

Spot gold dropped 0.4% to reach $1,365.00 by 1034 GMT, while U.S. December gold futures for delivery declined $8.40 an ounce at $1,364.20.

The London A.M. fix is $1,360.00

Thoughts that the Fed is set to taper its quantitative easing program, which helped change gold prices to record highs in 2011, has pressured the yellow metal to decrease by a fifth this year, but investors are still unclear on the future of the policy.

Ole Hansen, senior manager at Saxo Bank said “The Fed minutes tonight are more or less the only focus today – we’re treading water ahead of it,” he also added “Our consensus is (for stimulus to be reduced by) $20 billion (a month) at the beginning of September. Any deviation from that could have an impact on the price,”

The dollar index increased by 0.2%, up from a 2-month low on Tuesday, but continued to be under pressure from uncertainty in the markets.

SPDR Gold Trust, the world’s largest gold ETF, showed inflows of 1.8 tons on Tuesday, the fourth daily increase in its reserves through the last two weeks. Gold ETFs showed outflows of 402 tons in the first half of the year.

Indian gold futures traded near their highest in 8 months on Wednesday as the rupee declining, but demand continued to be unresponsive before of the resumption of imports.

UBS noted “India remains largely absent amid tighter regulations and a weak currency,” also added “Conversations with local participants suggest that there is good interest to re-start import activities soon, especially with authorities currently working to clarify the new rules.”

China and India demand is estimated to hit 1,000 tons each this year. (According to the World Gold Council)