Gold off three-week low

Gold gained on Wednesday, rebounding from a three-week low to which the precious metal dipped yesterday following U.S. data that showed low and steady inflation rate.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery were on the green side of the scale, gaining 0.30% for the day. The precious metal stood at $1 370.75 a troy ounce, ranging between days high and low at $1 373.25 and $1 364.15 an ounce, respectively.

Gold, which is used to hedge against inflation, plunged to its lowest level since May 23, $1 360.20 an ounce yesterday as somewhat positive U.S. economic data showed steady and low inflation and laid ground for speculations over the outcome of the FOMC meeting today.

Core CPI, which excludes the more volatile energy and food prices, rose only by 0.2% compared to 0.1% in April and met projections. On an annual basis Core Consumer Price Index also met expectations and remained the same compared to May 2012 at 1.7%. CPI for May was even lower than anticipated and stood at 0.1%, below forecasts for a 0.2% increase.

Meanwhile, a separate report showed the Housing Starts indicator was below forecasts of 0.950 million gain, but standing at 0.914 million it outperformed April’s 0.856 million reading. Building Permits stood at 0.974 million, below projections of 0.977 million and below last month’s revised reading of 1.005 million.

Kotak Commodity Services Ltd., based in Mumbai said in a report today: “Any signs of improvement in growth expectations will further fuel uncertainty about the Fed’s asset purchase program. Any sign of curtailment in asset purchases will be negative for gold, however it has been factored in to some extent.”

As the gold tumbled into a bear market in April, many individual and institutional investors cut their holdings in gold-backed ETPs. Gold has lost 18% of its value this year alone and holdings in ETPs fell 1.6 metric tons yesterday, down to 2 114.6, which is the lowest since March 2011, according to Bloomberg data.

Xiang Nan, an analyst at CITIC Securities Futures Co. commented for the media: “Gold remains trapped in a range as no one wants to take a stand before the end of the Fed meeting. Investors will be watching closely what the Fed has to say with regards to monetary stimulus.”

Elsewhere on the precious metals market, silver, platinum and palladium marked daily losses. Silver for July delivery lost 0.17% and stood at $21.460 an ounce, ranging between days high and low at $21.703 and $21.493 respectively. Platinum July futures fell 0.26% to trade at $1 436,30 at 13:02 GMT. Palladium for September delivery tumbled 0.29% and stood at $706.80 after it hit days high at $713.40 and low at $705.50 an ounce.