Gold trading at its lowest in a week

SINGAPORE.- Gold was trading near its lowest in a week on Wednesday, after sharp overnight losses on speculation about further cuts to US stimulus measures and an improving outlook for the global economy. Investors are turning away from putting new money into gold as the recovery in the international economy, led by the US, is boosting stock markets and hurting the metal’s appeal as a safe-haven investment.

Gold started 2014 on a positive note but worries over stimulus cuts, which weighed on prices last year, are catching up. The Federal Reserve holds its next policy meeting on January 28-29 when markets think the US central bank will announce a second cut to its U$85bn monthly bond purchases, which had burnished gold’s inflation-hedge appeal.

“We think volatility will increase markedly next week heading into the Fed policy statement,” INTL FCStone analyst Edward Meir said.

Spot gold was little changed at US$1 243,10 an ounce by 3.34am GMT, after falling nearly 1 percent on Tuesday – its biggest one-day decline this year.

Further hurting bullion, the International Monetary Fund raised its global growth forecast for the first time in nearly two years, saying fading economic headwinds should permit advanced nations to pick up the mantle of growth from emerging markets.

Traders said prices could fall further as Chinese physical purchases were also slowing. Chinese premiums eased to US$11 an ounce on Wednesday from US$13 in the previous session. Premiums were higher earlier in the year on strong demand for the Lunar New Year holiday.

Platinum was trading 0,4 percent higher at US$1 453,75, close to its near three-month peak, as strikes were set to begin on Thursday at the South African mines of top producers.

The move could hit more than half of global output of the precious metal and bosses of the world’s top three platinum producers accused the Association of Mineworkers and Construction Union (Amcu) of making “unaffordable and unrealistic” demands. Despite the metal’s recent gains, HSBC analysts said the reaction had been subdued.

“A mining strike in South Africa would historically be bullish for the PGMs (platinum group metals) but the muted reaction more recently to the announcement for a possible strike may be due to investor awareness of producer stockpiling ahead of the wage negotiation period last year,” the analysts said in a note.- Reuters.