Gold steady ahead of Fed meet; stimulus outlook in focus

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold was steady on Tuesday after sliding in the previous session, with investors worried the U.S. Federal Reserve could make further stimulus cuts this week.

An improving economy prompted the Fed to announce last month a cut in its bond-buying stimulus by $10 billion, and the U.S. central bank is widely expected to make a similar reduction in a two-day policy meeting that begins on Tuesday.

Scaling back on the stimulus measures would dim gold's appeal as an inflation-hedge and hurt prices, but any further weakness in equities could boost the metal.

"Gold could be under pressure in the wake of the Fed move, but another turn lower in U.S. stocks could offer an element of support," said Edward Meir, an analyst at INTL FCStone.

"Our thinking is that equities may have lower to go still and that Monday's sell-off in gold may prove short-lived."

Spot gold was largely unchanged at $1,257.04 an ounce by 0733 GMT. It closed 1 percent lower on Monday after retreating sharply from a two-month high of $1,278.01.

Gold usually moves in the opposite direction of equities as it is considered an alternative investment to risky assets.

Global shares have been under pressure recently on concerns about slowing growth in China, capital outflows from emerging markets and a weak U.S. earnings season.

PHYSICAL DEMAND

Data on Monday showed that China's 2013 gold imports from Hong Kong more than doubled from the previous year to hit a record of 1,158.162 tonnes as a sharp fall in prices led to unprecedented demand.

However, imports are expected to slow after China celebrates the Lunar New Year as demand eases on continued price volatility and due to sufficiently stocked dealers. The holiday begins on January 31 this year and runs into the first week of February.

"In coming days, gold is set to lose a major price support as China winds down for the Lunar New Year and their gold demand may remain absent in ensuing weeks," ANZ analyst Victor Thianpiriya said in a note.

"We are cautious of chasing rallies in this environment. With the market absent a large buyer, gold is likely to find difficulty maintaining gains."

Premiums for 99.99 percent purity gold on the Shanghai Gold Exchange slipped to $7 on Tuesday from $10 in the previous session.

Platinum rose as government-brokered talks between South Africa's striking miners and the world's top three platinum producers ended on Monday with no breakthrough in efforts to end a work stoppage that has hit half of global output of the metal.

PRICES AT 0733 GMT

Metal Last Change Pct chg

Spot gold 1257.04 0.6 0.05

Spot silver 19.72 0.04 0.2

Spot platinum 1414.25 7.25 0.52

Spot palladium 720.5 0.5 0.07

Comex gold 1257.4 -6 -0.47

Comex silver 19.75 -0.04 -0.22

Euro 1.367

DXY 80.471

COMEX gold and silver contracts show the

most active months

(Editing by Joseph Radford and Muralikumar Anantharaman)