SINGAPORE: Gold traded in a narrow range below $1,250 an ounce on Wednesday, as strong US housing data stoked fears that the Federal Reserve would soon begin rolling back stimulus measures, and reduce gold's appeal as a hedge against inflation.
Permits for future US home construction marked a near 5-1/2 year-high in October and prices for single-family homes notched big gains in September - the latest signs of strength in the economy, which could prompt the Fed to reduce its monthly bond purchases of $85 billion soon.
Economists polled by Reuters expect the US central bank to begin tapering only in March, but gold prices are subdued as traders still see a risk that the Fed could begin tapering in December.
"We still see some upward potential in the short to medium term as markets adjust tapering expectations," said Alexis Garatti, an economist at Haitong International Research in Hong Kong.
However, technical analysts warned that as long as gold remains below $1,300 it faces the risk of further declines.
Spot gold had ticked up 0.2 percent to $1,245.59 an ounce by 0401 GMT, after dropping 0.7 percent in the previous session.
If bullion cannot close above a resistance level at $1,260 an ounce in the next few days, prices may fall back, analysts from Wing Fung Financial Group said in a note.
The metal has fallen over 25 percent this year as investors pulled money out of bullion to invest in higher-yielding equities.
CHINA DEMAND
China's net gold imports from Hong Kong hit the highest in seven months in October, data released on Wednesday showed, as the country bought more than 100 tonnes of gold for a sixth straight month to meet unprecedented demand for bullion.
China is set to overtake India as the biggest gold consumer this year. Rules introduced by India in mid-year curbed demand for gold -- the second largest single item on its import bill after oil.
The Indian government took the steps in order to take pressure off the rupee exchange rate and reduce a worryingly high current account deficit.
Chow Tai Fook Jewellery Group Ltd, the world's largest jewellery retailer by market value, posted a 92.3 percent rise in net profit for the six months ended in September, thanks to strong Chinese demand.
Comments
Comments are closed.