Gold Ends Lower On Global Cues

(RTTNews) - Gold futures snapped a two-day gain to end lower on Wednesday, with investors focused on the political developments in Greece and China tightening rules of short-term loans. The losses were capped as global equity markets declined and the dollar weakened.

Investors will be focused on the Federal Reserve's upcoming interest rate decision for clues about when the U.S. central bank will start raising interest rates. Anxiety over weakening equities and a subdued global economic environment has boosted the value of the precious metal of late.

The dollar may strengthen significantly if the Fed drops its vow to keep rates low for a "considerable time," potentially weighing on gold prices.

China's tightening of its short-term borrowing rules have continue to inspire a sell-off in riskier assets including government bonds.

Concerns of a slowdown in the world's second largest economy persisted, with Chinese inflation slowing to a five-year low in November and producer prices continuing to decline for the 33rd straight month, giving more space for the central bank to ease monetary policy further and stimulate recovery.

The political developments in Greece also were in focus with speculations rife as to the outcome of Prime Minister Antonis Samaras' surprise move to bring forward the presidential election by two months.

Analysts predict little or no chance for the prime minister's candidate and could result in early parliamentary elections in Greece, the outcome of which could favor the leftist Syriza party -- the fiercest opponent to the bailout deal Greece has agreed to.

Gold for February delivery, the most actively traded contract, dropped $2.60 or 0.2 percent to settle at $1,229.40 an ounce on the Comex division of the New York Mercantile Exchange on Wednesday.

Gold for February delivery scaled an intraday high of $1,238.90 and a low of $1,225.30 an ounce.

On Tuesday, gold futures soared to end at $1, 232.00 an ounce, up $37.10 or 3.1 percent, as the dollar trended lower against some major currencies with global equity markets declining after China tightened rules on short-term loans.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, moved up to 721.81 tons on Wednesday, from its previous close of 719.12 tons on Tuesday.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 88.38 on Wednesday, down from its previous close of 88.66 late Tuesday in North American trade. The dollar scaled a high of 88.81 intraday and a low of 88.32.

The euro trended higher against the dollar at $1.2423 on Wednesday, as compared to its previous close of $1.2375 late Tuesday in North American trade. The euro scaled a high of $1.2438 intraday and a low of $1.2363.

In economic news, inflation in China dropped to 1.4 percent in November, a five-year low, from 1.6 percent in October, the National Bureau of Statistics said Wednesday. It was forecast to remain unchanged at 1.6 percent.

Producer prices declined 2.7 percent in November from last year, which was faster than a 2.2 percent fall seen in October and the 2.4 percent drop forecast by economists.

Elsewhere in Asia, consumer confidence in Japan dropped unexpectedly in November, data from the Cabinet Office showed Wednesday. The consumer confidence index dropped to 37.7 in November from 38.9 in the previous month. Economists had forecast the index to rise to 39.5.

From Europe, the U.K. visible trade deficit narrowed to a seven-month low in October, due mainly to a fall in fuel imports, the Office for National Statistics said Wednesday. The visible trade gap fell to GBP 9.6 billion, the lowest since March, from GBP 10.5 billion in September. It was expected to decrease to GBP 9.5 billion.

Meanwhile, the British Chambers of Commerce downgraded the growth outlook for the U.K. citing slower than expected growth in services, household consumption and exports. The business lobby lowered its 2014 growth forecast to 3 percent from 3.2 percent and the forecast for 2015 was downgraded to 2.6 percent from 2.8 percent.