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  • Gold hits six-month low ahead of Fed minutes



    By icn.com

    Gold dropped to six-month low on Tuesday, as investors shifted to more risky assets on optimistic global outlook, ahead of the much anticipated Federal Reserve minutes, which is likely to entail an early end to the Fed’s stimulus program.

    Spot gold dropped sharply to as low as $1579.60 on Wednesday heading for the fifth consecutive day in losses, breaking the strong technical support at $1585, and heading towards further losses, targeting $1565. Our stop loss would be below $1572.00.

    Gold reached the lowest since August and is down 5% in 2013, as optimism grows about global economic recovery. With U.S. equities striking multi-year highs, investors’ risk appetite is notably growing at the expense of demand for the precious metal.

    In addition, Asian shares reached multi-month highs earlier on improving global economic outlook, which placed further pressure on gold.

    On the last Federal Open Market Committee minutes, members indicated that the Fed’s quantitative easing program may be headed to an end before the end of 2013. Accommodative monetary policies such as this boosted gold to record highs in recent years, as investors sought to hedge against the inflation that may follow the increased liquidity in the financial system.

    Investors lay on the sidelines, awaiting the release of January’s policy meeting details, looking for an expiry date on the bond-buying program.

    Also, the U.S. dollar gained against other major currencies, as the dollar index climbed to 80.63, from an opening at 80.48. A stronger dollar tends to put more pressure on dollar-denominated commodities such as gold by making them more expensive for holders of other currencies.


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