Gold Prices To Drop on US Fed Reserve Stimulus Taper

Gold prices are set to drop next week with several analysts expecting the precious metal to log a little more weakness, following a further $10bn reduction in US stimulus, before it bounces back.

As many as eight of 18 analysts polled in a Kitco Gold Survey said they expected gold prices to drop next week, while six predicted that prices would rise and four forecast prices to remain unchanged.

Daniel Pavilonis, senior commodities broker, RJO Futures, said: "What we've seen in the past after FOMC tapering is the market [would] sell off, then stabilize a bit. I'm going to watch to see if that happens again."

Charles Nedoss, senior market strategist at LaSalle Futures Group, said: "I think we have a little more downside to this. We're holding just under the key support levels. Last week we went up to $1,400, [nearly] hit it on [16 March] and spent the rest of the week selling off. For next week we need to get above $1,346.50, which is the 20-day moving average. The 20-day and the 10-day are flatting out, so that could be a ceiling. If we can't close above $1,346.50, then we could come to test the 200-day and the 50-day, which are now sitting at $1,302.60 and $1,299.10,".

However, Ken Morrison, editor of online newsletter Morrison on the Markets, forecast bullion could end higher next week.

"It was a rough week for those of us who were bullish gold a week ago... the trifecta of bearish news. [Russian President Vladimir] Putin didn't advance his aggression beyond Crimea, [Federal Reserve Chair Janet] Yellen made one hint of a more hawkish-than-Bernanke view strengthening the dollar, and the WSJ [Wall Street Journal] story the European Union is 'considering' relaxing the 400-metric-ton-a-year selling limit on EU central bank gold reserves," Morrison said.

"Despite all that, gold has held the secondary support levels (around) $1,325 and we expect the next stage will be an intervening rally that carries gold back toward the $1,360-75 level. We look for gold to close higher in the week ahead," he added.

Gold Ends Lower

US gold futures finished $5.50, or 0.4%, higher at $1,336.00 an ounce on 21 March.

Futures lost 3.4% for the week as a whole.

Spot Gold added 0.5% to $1,335 on 21 March.

India Eases Import Curbs

India's central bank has allowed five private sector banks to import gold, in a move that marks a major step towards easing the nation's tough bullion import restrictions, imposed last year in a bid to cut the country's trade deficit.

The central bank decision could boost gold supplies, curb smuggling, and bring down premiums for the yellow metal in India, the world's second-largest bullion consumer.

Gold prices struck six-month highs on 17 March as the possibility of western sanctions against Moscow, relating to the Russia-Crimea referendum, boosted the metal's safe haven status.