Gold steady ahead of US data; drop in SPDR holdings jolts market
Singapore: Gold traded in a tight range on Tuesday as the market waited for US economic data but investor sentiment was undermined by a big drop in holdings in the largest gold-backed exchange-traded fund.
Holdings in SPDR Gold Trust fell 10.51 tonnes on Monday to 871.72 tonnes, their lowest since Feb. 2009. It was the biggest one-day fall in the fund's holdings since early July.
Its holdings have fallen about 430 tonnes so far this year and this has been a big contributor to the 21 percent drop in the gold price in 2013.
Flows from the fund are watched closely as they provide an insight into the thinking of investors such as US hedge fund manager John Paulson who have big positions in gold.
"(The) low in the ETF position mirrors a structural adjustment," said Alexis Garatti, an economist at Haitong International Research in Hong Kong.
"With quantitative easing policies, excess liquidity boosted positions in gold but we will soon exit QE, which is why there is a normalisation now."
Spot gold rose 0.1 percent to USD 1,316.90 an ounce by 0626 GMT, after ending flat in the previous session.
"The drop (in SPDR holdings) doesn't bode too well for prices, especially now, when there hasn't been any US data for a while," said one Hong Kong-based trader.
"However, prices will be range-bound till we get nonfarm data later today. It should also get some support from talk that tapering could get delayed into next year," the trader added.
Traders are looking to US nonfarm payrolls data for September -- due on Tuesday after being delayed by a partial government shutdown this month -- to gauge the fate of the Federal Reserve's bond-buying stimulus programme.
Some economists polled by Reuters believed the Fed could postpone the scaling-back of its USD 85 billion monthly bond purchases to next year as budget problems in Washington remain unresolved.
Last week lawmakers reached only a temporary agreement to avert a historical debt default, raising the risk of another government shutdown early next year.
Gold could see some stability for now as the delay in tapering could increase demand for gold in emerging economies, said Haitong's Garatti.