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SINGAPORE. — Gold hovered near three-week lows on Thursday as the US dollar jumped on expectation the Federal Reserve could end its bond-buying programme this northern autumn, hurting the metal’s safe-haven appeal as a hedge against inflation.
Although concern about the Ukraine crisis could lend support, the bullion market was suffering from a lack of physical buying from top gold consumer China following a sharp drop in its currency.

Janet Yellen, speaking at her first news conference as the Fed chairwoman after the close of the US central bank’s two-day policy meeting, said the central bank could start to raise interest rates about six months after its current asset-purchase programme ended.

“Physical demand is still very quiet and slow. The market may recover and rally from here but the upside will be limited,” Wing Fung Precious Metals’ head of dealing, Peter Fung, said.

He pegged resistance at us$1 340 and us$1 350 an ounce.

Gold could still fall back to about us$1 300 an ounce, said Mr Fung, adding that sentiment was mixed as a move by the Fed to reduce bond-buying could overshadow the impact from tension in Ukraine.

Cash gold hit a low of us$1 325,34 an ounce, its weakest since February 28, and stood at us$1 333,31, up 0,19 percent on short-covering. It briefly rose to a six-month top of us$1 391,76 on Monday on tension in Ukraine and concern about growth in China.

The US warned Moscow it was on a “dark path” to isolation on Wednesday as Russian troops seized two Ukrainian naval bases, including a headquarters in the Crimean port of Sevastopol where they raised their flag.

US gold for April delivery was at us$1 334 an ounce, down 0,54 percent, having earlier hit us$1 326,10, its lowest since the end of February.

The US dollar was holding hefty gains in Asia on Thursday as investors wrestled with the risk that US interest rates could rise sooner and faster than previously thought, pressuring stock and bond prices.

In the physical market, premiums for gold bars in Hong Kong were unchanged from last week at us$1 an ounce to the spot London prices, and at 80c-us$1 in Singapore.

Domestic gold prices in China remained at discounts to cash gold.

“I’ve noticed that demand from China has weakened after the Chinese New Year. Although there are imports, I don’t think they reflect the real demand.

“It looks like buyers are just filling the import quotas,” said a dealer in Singapore.

“We saw some buying this morning, but surprisingly the current price is not good enough to attract people to rush and buy physical gold. The picture is totally different from last year.”

India has allowed five domestic private-sector banks to import gold, in what industry officials say could be a significant step towards easing of tough curbs on the metal imposed last year to cut the country’s trade deficit.—Reuters