Gold Prices to Rise on Hopes of Measured Federal Reserve QE Taper

Gold prices are set to rise next week, supported by speculation that downbeat US labour market data could prompt the Federal Reserve to ease the pace of its stimulus taper this year.

As many as 12 of 23 analysts polled in a Kitco Gold Survey said they expected gold prices to rise, five predicted that prices would drop and six forecast prices to remain unchanged.

Gold added some 1% on 10 December after weaker-than-expected US jobs figures suggested the American economy was recovering, albeit at a slower pace. The US unemployment rate dropped to 6.7% in December and 74,000 jobs were added to the world's largest economy, according to official figures.

Bob Haberkorn, senior commodities broker with RJO Futures told Kitco: "There are some ideas that maybe the Fed will be in the easing game for longer. Tapering is still happening, but maybe not as fast as we thought."

Macquarie analyst Matthew Turner told Reuters: "This is a bad NFP release and has given gold a boost ... but one swallow does not make a summer and one bad NFP print doesn't change 12 months of gold-bearish macroeconomic news."

"Gold has been on the firm side this year and this data helps support that but the effect is being moderated by the fact that the Fed has begun tapering. And so it would need a bigger shock to shift it from that course ... nobody is now thinking the US economy is near collapsing," Turner added.

Charles Nedoss, senior market strategist with Kingsview Financial told Kitco: "I think we could be sideways to a little higher next week. Gold is developing a little momentum. But we have to clear $1,250 to bring a little sponsorship and more volume in this market. If we can't do it by early next week, then I think the market turns (to the) sellers."

Gold Ends Higher

Spot gold finished 1.4% higher at $1,245 an ounce on 10 January. Prices rose 1.1% a week ago, ahead of the start of commodity index rebalancing activity on the Standard & Poor's GSCI and the Dow Jones UBSCI.

For the week as a whole, prices gained 0.3%.

US gold futures for delivery in February finished 1.3% higher at $1,245 an ounce on 10 January.

India Gold Restrictions

Indian authorities could slash record high import duties on gold and ease export rules later in the month to help reduce the country's trade gap and the threat of gold smuggling.

The decision to cut the import duty could be out anytime this month, an unnamed government source with direct knowledge of the deliberations told Reuters.

Jewellers, who estimate India's monthly demand to hover at 60 tonnes, have asked for the duty to be reduced to 8% from 10%.