December 17, 2013 / 10:52 AM / 6 years ago

PRECIOUS-Gold drops 1 pct on speculation over Fed tapering

* Doubts over timing of Fed tapering keeps gold in range
    * Biggest physical gold fund reports 1 percent outflow
    * Palladium down 2 pct on technical sales, hits 2-month low

 (Adds quote, second byline, dateline, updates market activity)
    By Jan Harvey and Julia Fioretti
    NEW YORK/LONDON, Dec 17 (Reuters) - Gold fell around 1
percent on Tuesday as investors shed some bullish bets on
expectations that the U.S. Federal Reserve may be poised to trim
its bullion-friendly economic stimulus.
    Palladium dropped 2 percent to a two-month low,
underperforming other precious metals, as a slide below a key
support level near $700 an ounce triggered technical selling,
traders said. 
    Data showing flat U.S. consumer prices in November also
pressured gold, but the lack of inflation pressures in the
economy will probably not stop the Fed from scaling back its
bond-buying program soon, analysts said. 
    "While the prospect of an immediate taper seems to be
diminishing for now, it seems only inevitable that the Fed will
act sooner rather than later, and the longer-term investors are
still being seen to reduce their exposure to gold as a result,"
said a trader at TD Securities' precious metals desk.
    Spot gold was down 0.9 percent at $1,228.54 an ounce
by 1:52 p.m. EST (1852 GMT). 
    U.S. Comex gold futures for February delivery settled
down $14.30 an ounce to $1,230.10, with trading volume about 25
percent lower than its 30-day average.
    Most observers expect the U.S. central bank to keep its $85
billion-a-month bond-buying stimulus in place, but recent brisk
improvements in the labor market have raised the chances that
the Fed, at its Dec. 17-18 meeting, will decide to taper its
economic stimulus program as early as this month.
  
    A run of well-received U.S. economic data, including
November payrolls earlier in the month, has fueled speculation
that the Fed may taper stimulus sooner rather than later. Gold
prices were down 25 percent this year mainly on Fed taper fears.
    
    PHYSICAL, INVESTMENT DEMAND OFF
    Consumers of physical gold in Asia held off fresh purchases
in anticipation of lower prices.
    In India, buying remained low-key due to non-availability of
stocks, supporting premiums. 
    Investment demand for physical bullion was lackluster, with
the world's largest gold-backed exchange-traded fund, the SPDR
Gold Trust, posting its biggest daily outflow in nearly
two months on Monday. 
    On Monday, the fund's holdings were down 8.7 tonnes, or 1
percent, to 818.9 tonnes, their lowest in nearly five years.
    Silver dipped 0.5 percent to $19.84 an ounce, while
platinum fell 1 percent to $1,344.24 an ounce and
palladium dropped 2.1 percent to $698.97 an ounce.
    
 3:22 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold FEB   1230.10 -14.30  -1.1  1226.50 1247.60  121,702
 US Silver MAR  19.840 -0.261  -1.3   19.675  20.230   38,588
 US Plat JAN   1344.60 -15.50  -1.1  1342.90 1365.00   11,259
 US Pall MAR    701.05 -15.30  -2.1   698.40  720.75    4,991
                                                               
 Gold          1228.54 -11.26  -0.9  1228.50 1248.10         
 Silver         19.840 -0.090  -0.5   19.720  20.220
 Platinum      1344.24 -13.51  -1.0  1348.75 1364.75
 Palladium      698.97 -14.78  -2.1   701.52  717.75
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        126,997   172,215   188,408     21.03   -0.34
 US Silver       41,011    57,090    57,769     30.23    1.75
 US Platinum     17,223    10,696    12,508     16.25    0.18
 US Palladium     5,061     7,265     5,932     22.07    1.08
                                                               
    

 (Editing by William Hardy, Dale Hudson and Bernadette Baum)
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