Gold recovered from a three-year trough on Friday as lower prices attracted Chinese buyers and as Asian stocks fell, but the metal was still headed for its worst week in nearly two years after the Federal Reserve said it would curb stimulus.
Spot gold was up 1.5 per cent at $1,297.01 an ounce by 0617 GMT on Friday. The metal earlier fell to $1,268.89 – its lowest since September 2010 and a level which would have marked the worst weekly decline in 30 years if it had ended the day there. Comex gold futures rose 0.8 per cent after declining over 1 per cent to their lowest in three years.
Buyers in India and China helped cap gold’s losses in April when gold fell its most in 30 years over two days. The sharp decline after 12 years of gains released pent up demand in Asia, sending kilo bar premiums to all-time highs. Demand in India has slowed in recent weeks due to government curbs on imports.
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“What the market is undergoing now is a state of normalisation, going back to pre-stimulus times,” said Joyce Liu, investment analyst at Phillip Futures in Singapore.
“Since the first stimulus programme, markets have jumped despite fundamentals not justifying such a spike.” Until recently, gold – seen as a hedge against inflation – had gained as the global economy took a hit and central banks acted to boost their economies. Gold touched an all-time high of $1,920.30 in 2011.
It has fallen 23 percent this year and nearly 7 percent this week on fears over the withdrawal of stimulus.
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