Gold dropped, paring the first monthly advance since August, as physical demand slowed before the Lunar New Year break and U.S. Federal Reserve policy makers further reduced stimulus.
Bullion for immediate delivery lost as much as 0.4 percent to $1,262.28 an ounce and was at $1,262.89 at 11 a.m. in Singapore. Prices rose 0.8 percent yesterday on concern a rout in emerging-market assets may deepen, spurring haven demand.
Increased physical demand in Asia has helped gold to rebound from a six-month low on Dec. 31, when prices capped the biggest annual decline since 1981. The support is waning just before the Lunar New Year, which begins tomorrow, according to Australia & New Zealand Banking Group Ltd. Volumes for the benchmark contract on the Shanghai Gold Exchange fell for a fourth day yesterday to the lowest level this year.
“The risk lies to the downside as physical demand will be muted,” said Wang Xiaoli, chief investment strategist at CITICS Futures Co., a unit of China’s biggest listed brokerage. “Investors have been selling out of emerging-markets since the Fed started tapering and while this has increased some safe- haven demand, less stimulus is also not positive for gold.”
Asians are the biggest buyers of gold and financial markets in China, Hong Kong, Malaysia, Singapore and Taiwan and Indonesia will be shut tomorrow.
The Federal Open Market Committee said yesterday that it will cut monthly bond-buying by $10 billion to $65 billion, deciding to trim purchases for a second straight month after the U.S. economy showed signs of improvement. Central banks from India to Turkey and South Africa raised borrowing costs this week to try to stem capital outflows amid concern that China’s economy is slowing.
Gold for April delivery traded at $1,263 an ounce on the Comex in New York from $1,262.20 yesterday, when prices increased 0.9 percent. Holdings in the SPDR Gold Trust, the biggest exchange-traded product backed by bullion, rose yesterday for the first time since Jan. 17.
Silver lost 1.1 percent to $19.5501 an ounce, paring the first monthly advance since October. Palladium fell 0.1 percent to $713.80 an ounce, dropping for an eighth day in the longest losing streak since June 2012. The metal is on course for a third monthly decline.
Platinum decreased 0.3 percent to $1,408.63 an ounce to trim a second monthly gain. While the biggest producers offered striking South African miners a series of pay increases, the union leading the walkout said that fails to meet demands.