Gold Prices Slip as Fed Tapering Talk Resumes

By Jan Harvey

LONDON -- Gold prices eased Monday, surrendering some of the gains made in the previous session after disappointing U.S. jobs data, on expectations the Federal Reserve will press on with some tapering of monetary stimulus in the near future.

Speculation that the U.S. central bank is set to trim its $85 billion monthly bond-buying program, a key driver of higher bullion prices, has helped knock gold 17 percent lower this year after more than a decade of gains.

Spot gold was down 0.3 percent at $1,386.91 an ounce at 0943 GMT (5:43 a.m. Eastern time), while U.S. gold futures for December delivery were up 80 cents an ounce at $1,387.30.

Prices rose 1.7 percent on Friday after a report showing U.S. nonfarm payrolls grew less than expected last month cast doubt on the strength of the U.S. recovery. The unemployment rate, the Fed's favored measure of job market health, eased 0.1 point, however.

Comments by two Fed officials that suggested stimulus unwinding remained on track helped the dollar recover to around levels seen before Friday's U.S. jobs numbers.

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"The Federal Reserve meeting remains an event risk for gold, and I think there's growing consensus that tapering is going to come eventually," Credit Suisse's head of commodities research Tobias Merath said.

"The main question is, are potential gold investors incentivized enough to step up purchases more meaningfully again? The answer, from our side, is no," he added. "With the move up in 10-year yields to close to 3 percent, this is a new world, and that disincentivizes investors to buy gold."

A rise in Chinese exports lifted world equity markets on Monday, though worries about a possible military strike on Syria and uncertainty over the Fed's plans for its stimulus program saw investors hedge their bets.

Eyes on India

Indian jewelers expect a surge in gold shipments this week after the customs department issued new import guidelines on Wednesday. Previously imported stocks had become stuck at Mumbai airport due to a lack of clarity on rules.

Gold traders are closely watching Indian appetite for gold in the usually peak-demand fourth quarter, after officials in the world's largest gold consumer moved to curb imports in an effort to cut its record current account deficit.

"We should keep an eye on demand from Asia during the festival season," said Peter Fertig, a consultant at Quantitative Commodity Research. "Given the measures the central bank has already taken and appeals to sell gold, there is a risk that the physical demand for India may disappoint."

On the supply side of the market, workers in South Africa's motor and gold industries will return to work this week after strikes that have crippled operations at some of the country's biggest producers were resolved on Sunday.

South Africa's Harmony Gold said operations were back to normal at all its mines after striking miners resumed work during Sunday's night shift.

Among other precious metals, silver was down 0.5 percent at $23.71 an ounce, while spot platinum was up 0.2 percent at $1,492 an ounce and spot palladium was down 0.4 percent at $694.97 an ounce.

-Additional reporting by Lews Pardomuan in Singapore.