Wednesday, 1 January 2014 00:00
REUTERS: Gold staged a modest rebound on Tuesday after falling more than 1% in the previous session, but the precious metal was still heading for its biggest annual decline since 1981 because investors shifted money to equities.
A drop in exchange-traded funds holdings shows investors lost faith in bullion as a hedge against inflation and an alternative investment after the US Federal Reserve announced plans to trim in its big monthly bond purchases.
Gold added $ 2.80 an ounce to $ 1,198.80 by 0255 GMT, but was set to end this year down around 28%. Prices were sharply lower than all-time highs above $ 1,900 in 2011, when a worsening debt crisis in Europe sparked buying. Bullion tumbled to a six-month low around $ 1,185 on 20 December after the Fed’s decision to scale back its bond-buying stimulus prompted a sell-off.
“For the next quarter, precious metals as a whole still look weak. We might see gold, especially during the first quarter, test the lows of this year, which are not far away,” said Brian Lan, managing director of GoldSilver Central Pte Ltd. in Singapore
“I think the next level to test is $ 1,088. The US economy will look to recover and the stock market is also looking much more attractive at this moment,” he said.
US gold fell 0.47% to $ 1,198.20 an ounce.
As investors abandoned gold, SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.37% to 798.22 tons on Monday from 801.22 tons on Friday. In terms of ounces, holdings fell to 25,663,578.79 - their lowest since 2009 - from 25,760,019.68. “We don’t have much to add to our short-term view on gold,” Edward Meir, an analyst at INTL FC Stone, said in a report.
China’s net gold imports from Hong Kong fell 42% to below 100 tons in November, reflecting a drop in demand from jewellers and retail investors after strong purchases in recent months.