Gold falls for fourth day on Fed concerns, strong dollar

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Gold prices fell for the fourth day on Thursday at the domestic markets as doubts emerged over the longevity of the US Federal Reserve's USD 85 billion bond buying program, dimming the appeal of the bullion which is a hedge against the inflationary risk of monetary stimulus while subdued physical demand in the domestic spot market also played spoilsport. Gold futures for April 2013 contract, at MCX, were trading at Rs. 29,345 per 10 grams, down by 0.79 per cent after opening at Rs. 29,551 against the previous closing price of Rs. 29,579. It touched the intra-day low of Rs. 29,263 till the trading. (At 11.22 AM today).

The minutes from US Federal Reserve's last meeting showed that policymakers were divided over Fed chairman Ben Bernanke's asset purchases plan until there is a considerable improvement in the US labour market with some members calling for an earlier exit from QE3 while others warning that a premature stimulus exit may prove to be costly for the economy. Members called on the central bank to vary the pace of its monthly asset purchase program considering the changes in economic outlook and the risks and benefits of further stimulus.

Moreover, stronger dollar makes gold expensive for those holding other currencies, thus reducing demand. The U.S. dollar index, a measure of the value of the United States dollar relative to a basket of foreign currencies, was trading 0.22 per cent higher at 81.244 on the Inter-Continental Exchange (ICE) at 11.26 am IST.

At the Commodity Exchange (COMEX), gold future for April 2013 delivery traded at US$1,559.6 per ounce, down by 1.17 per cent. It opened at US$1,564.8 against the previous closing price of US$1,578. It touched the intra-day low of US$1,554.3. (At 11.23 am IST).

Story first published: Thursday, February 21, 2013, 15:30 [IST]
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