Singapore - Spot gold slipped on Thursday under the weight
of a rallying dollar, after falling more than 1% in the previous session when
the US Federal Reserve announced its plan to load up long-term securities and
offered a grim economic outlook.
Warning of "significant" downside economic risks,
the US central bank said it would launch a $400bn programme to shift its $2.85
trillion balance sheet more heavily towards longer-term debt.
The decision disappointed investors who had hoped for
stronger stimulus measures, prompting a slide in stocks and commodity prices.
The worries about the eurozone's debt crisis continue to
support the safe haven appeal of gold, but momentum is lacking for bullion to
march towards its record high above $1 900.
"For the short term, gold is likely to remain in the
range of $1 750 and $1 850,” said Ong Yi Ling, an analyst at Phillip Futures.
"If we do see $1 700, that could potentially cause a
greater correction to $1 500."
Spot gold lost 0.3% to $1 775.40 an ounce by 06:09 GMT,
extending a 1.2% decline in the previous session.
The most-active US gold futures contract fell as much as 2%
to $1 772.5, before recovering to $1 778.20.
Technical indicators bode ill for gold prices. Spot gold
prices could fall towards $1 730 during the day, said Reuters market analyst
Wang Tao.
The dollar index rose to a seven-month high as investors
piled into the greenback, lured by the appeal of short-term rates on US bonds after the Fed announcement.
A pricier dollar makes commodities denominated in the greenback
more expensive to buy for holders of other currencies.
"Investors are buying the dollar and selling
gold," said Ronald Leung, a dealer at Lee Cheong Gold Dealers in Hong
Kong.
"But the physical supply is a bit tight, as Asian
buyers stock up on physical gold."
Investors are shifting their attention to the Group of 20
talks, due to take place in Washington on Thursday and Friday, where Europe
will be under heavy pressure to stem its deepening debt crisis.
Other precious metals also weakened amid a commodity-wide
slide.
Spot palladium dropped to a 10-month low of $680.15,
tracking a price drop in gold as well as industrial metals.
Spot platinum dipped to a six-week low $1 740.55, before
recovering to $1 747.24.
China's factory sector contracted for a third consecutive
month in September as flagging overseas demand put the brakes on new orders,
HSBC's China Flash PMI data showed.
Slower growth in the world's top commodity consumer could
add to pressure on prices of silver, platinum and palladium, which have wide
industrial applications.