Weaker oil, strong equities clip gold prices
CHICAGO (Sept 10) Gold tracked oil lower on Tuesday after Russia offered to work with Damascus to put Syria's chemical weapons under international control, while firmer equities also dented the precious metal's appeal.
Bullion, which has slipped nearly 18 percent this year, is also under pressure from expectations the US Federal Reserve will opt to taper its monetary stimulus programme after the Fed's Open Market Committee (FOMC) meeting on Sept. 17-18.
Gold fell $8.74 an ounce to $1,378.20 by 0636 GMT, well below an all-time high around $1,920 struck in September 2011. The Fed's stimulus, known as quantitative easing or QE, has been a key driver in gold's rally in recent years.
"People are waiting for the next FOMC meeting to see whether they are going to end the QE or reduce buying debts. Sentiment is not that bullish," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
"I think $1,400 will be capped for the time being. Physical demand is very weak in Hong Kong."
Premiums for gold bars were little changed from last week at $2 to $2.50 an ounce in Hong Kong to spot London prices, reflecting a lack of activity in the physical market.
Spot gold may have completed a rebound from the Sept. 6 low of $1,362.55 per ounce and is expected to revisit that low, says Wang Tao, a Reuters market analyst for commodities and energy technicals.
US gold was at $1,378.70 an ounce, down $8.00.
Brent crude futures fell to a one-week low below $113 a barrel on Tuesday after Russia's proposal to avert a possible US strike against Syria.
Investors shifted some of their money to equities after stocks in Asia hit three-month highs as investors wagered upcoming Chinese data would add to signs the global economy is stabilising.
The Nikkei closed at a 5-1/2-week high as companies expected to benefit from the 2020 Summer Olympics kept drawing retail investors, while positive leads from global markets and China data boosted sentiment.
A weaker yen and recent gains in the yen denominated Tokyo gold futures spurred selling in the physical market in Japan. Gold premiums were on par to 25 cents below the spot London prices.
"We were quoting gold bars at zero premiums last week, but the yen is getting weaker, so the general public is selling gold to us at this moment," said a physical dealer in Tokyo.
Premiums in Singapore were steady from last week at $1 to $1.50 an ounce. "Physical demand has picked up but it's not great. Indonesian clients are still selling gold because of a weak rupiah," said a dealer in Singapore.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.23 percent to 917.13 tonnes on Monday from 919.23 tonnes on Friday.