Gold slashed early gains on Tuesday, extending its losses into the European session as fears of a cash crunch in China and signs of an early quantitative easing exit to the Federal Reserve’s $85 billion monthly bond purchases spooked investors.
As of (09:30 GMT+3), gold for immediate delivery rose 0.34% or 4.31 points on Tuesday to trade at $ 1,281.60 an ounce after opening at $1,282.50, having earlier hit a high of $1,288.41, and a low of $1,273.42.
Gold edged higher earlier in the session after two top Federal Reserve, Minneapolis Fed President Narayana Kocherlakota and Dallas Fed President Richard Fisher downplayed an early end to monetary stimulus.
Fed’s Kocherlakota said the fed is not close to tightening policy, and that the end of bond buying should be tied to a threshold for the unemployment rate. Fisher said even if the central bank ended stimulus this year, it will still be running an accommodative policy.
Last week, gold plunged to its lowest since September 2010, after Fed chairman Ben Bernanke suggested that U.S. economic growth was strong enough to begin tapering back on its $85 billion in monthly asset purchases later this year.
Other precious metals also gained:
- Silver picked up 0.83% to trade around $ 19.73
- Platinum edged 0.34% higher to $ 1,337.10
- Palladium rose 1.36% to $ 664.80
The drop in the metal’s prices failed to revive physical demand while investors continued to slash holdings in gold exchange-traded funds, despite the metal`s safe-haven asset. Holdings in the SPDR Gold Trust, the world`s largest gold-backed exchange-traded fund, fell 0.43% to 985.73 tons on Monday - the lowest in over four years.
Hedge funds and money managers again slashed gold futures and options for the second consecutive week, to their lowest level in a month.
Goldman Sachs cut its year-end 2013 gold price forecast to $1,300 an ounce from $1,435. HSBC lowered its 2013 gold price forecast to $1,396 from $1,542 an ounce, and its 2014 price to $1,435 from $1,600.
Elsewhere, Fears of a credit crunch in China`s banking system eased on Monday after short-term interest rates fell. The People’s Bank of China noted its readiness to adjust monetary policies and boost further easing, as cash liquidity soared to its highest levels since 2003.