Morning: Gold Stable on U.S. Shutdown Pressure

gold-bars-and-us-dollar-bills

(Reuters) – On Monday, gold steadied, stressed to develop its biggest weekly increase in two months, as a rally sparked by prospects that the Federal Reserve will delay tapering its monetary stimulus programme stressed out.

Gold increased around 4% last week on prospects the Fed would have to retain stimulus measures after a two-week government shutdown injured growth outlooks. But firm increases in other assets have reduced gold’s appeal to investors, whereas physical demand remains lackluster.

Spot gold was stable at $1,315.30 an ounce at 1015 GMT, whereas U.S. gold futures for December delivery increased 20 cents an ounce at $1,314.80.

Spot prices reached their highest in 1-1/2 weeks on Friday after recovering from a three-month low at $1,251.66.

The London A.M. fix is $1,316.00.

VTB Capital analyst Andrey Kryuchenkov said “The move last week was largely driven by short covering and renewed dollar weakness,” and also added “Buying had already dried up with little follow-through investment.”

Gold had dropped by more than a fifth this year on anticipations around the Fed’s $85 billion monthly bond-buying, which has moved gold higher by forcing long-term interest rates and rising worried about inflation, is coming to an end.

India Gold Imports

Indian gold importers, the world’s largest consumer of the yellow metal, fought to get supplies on Monday, paying record premiums just before of the festival season next month.

Indian sellers have hard time to source supplies for domestic use for nearly three months, since the central bank announced a rule that needed 20% of all imports be re-exported.

New York’s SPDR Gold Shares, the world’s largest gold-backed exchange-traded fund (ETF), holdings held around 4-1/2 year lows on Monday, posting seven consecutive weekly outflows last week.