Gold steady ahead of Fed meet; stimulus outlook in focus

Jan 28 2014, 09:49 IST
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Gold was steady on Tuesday after a sharp slide the session before, with investors worried the US Federal Reserve could make further stimulus cuts this week. Gold was steady on Tuesday after a sharp slide the session before, with investors worried the US Federal Reserve could make further stimulus cuts this week.
SummaryGold was steady on Tuesday after a sharp slide the session before, with investors worried the US Federal Reserve could make further stimulus cuts this week.

Gold was steady on Tuesday after a sharp slide the session before, with investors worried the US Federal Reserve could make further stimulus cuts this week.

An improving economy prompted the Fed to cut its bond-buying stimulus by $10 billion last month, and the US central bank is widely expected to make a similar reduction in a two-day policy meeting that begins on Tuesday.

Scaling back on the stimulus measures would dim gold's appeal as an inflation-hedge and hurt prices, but any further weakness in equities could boost the metal.

"Gold could be under pressure in the wake of the Fed move, but another turn lower in US stocks could offer an element of support," said Edward Meir, an analyst at INTL FCStone.

"Our thinking is that equities may have lower to go still and that Monday's sell-off in gold may prove short-lived."

Spot gold was large unchanged at $1,257.22 an ounce by 0341 GMT. It closed 1 percent lower on Monday after retreating sharply from a two-month high of $1,278.01.

Gold usually moves in the opposite direction of equities as it is considered an alternative investment to risky assets.

Global shares have been under pressure recently on concerns about slowing growth in China, capital outflows from emerging markets and a weak US earnings season.

PHYSICAL DEMAND

Data on Monday showed that China's 2013 gold imports from Hong Kong more than doubled from the previous year to hit a record of 1,158.162 tonnes as a sharp fall in prices led to unprecedented demand.

However, imports are expected to slow after China celebrates the Lunar New Year as demand eases on continued price volatility and due to sufficiently stocked dealers. The holiday begins on Jan. 31 this year and runs into the first week of February.

Meanwhile, platinum rose as government-brokered talks between South Africa's striking miners and the world's top three platinum producers ended on Monday with no breakthrough in efforts to end a work stoppage that has hit half of global output of the metal.

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