Despite rising earlier in the trading day, gold slipped on Monday trading amidst the news that the U.S. Federal Reserve would decide to roll back its stimulus from this month. The news that gold prices are falling is heartening for the Chinese central bank which is looking forward to amass the precious metal as the prices fall.
Spot gold recorded its steepest weekly drop in more than two months last week, and slipped further in early trading by 0.1 percent to $1,324.61 an ounce by 0650 GMT.
However, now it is higher at $1,334.46. Like gold prices, the prices for silver fell nearly 2 percent at the end of last week. The bullion market was bearish despite early gains for gold in today’s trading.
Even SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund recorded a fall of 0.66 percent to 911.12 tonnes on Friday. Today it opened at 127.18 and peaked at 127.96. At point time, it even dipped to 126.22.
Reports are ripe that hedge funds and money managers backed off from investing in futures and options of the U.S. gold markets for the first time in 5 weeks.
China Pleased to Buy More Gold
As the precious metal is all set to fall below $US1000 an ounce and the bank’s target average for 2014 is $US1050 an ounce, China is willing to buy more gold. Market observers believe that though it is a tough week for gold, China is pleased to buy more gold, particularly when gold lost 5.5 per cent last week and dropped 22 per cent since January 1.
China has been buying a lot of gold this year and its gold-buying spree in the first six months of 2013 is still continuing, particularly when the prices of the precious metal go down. A trend has been seen that when gold’s prices hit rock bottom, China buys it in huge quantities.
Some observers believe that fears of an economic slowdown and lingering worries over a credit crunch also leads to more gold buying. Falling gold prices will also be appreciated by India which imports a lot of gold.
In fact, India which raised import taxes three times in eight months may reconsider its decision if prices fall further. Gold’s demand from India reached 566 tonnes in the first half of 2013 which is an almost 50 percent jump; however, it is lower than China’s 600 tonnes.
To contact the reporter of this story: Jonathan Millet at email@example.com