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Gold premiums ease in Asia as volatile prices, Fed keep buyers away

A couple selects diamond rings at a Chow Tai Fook store in Shanghai September 16, 2013. REUTERS/Aly Song/Files

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold premiums across Asia fell this week as volatile prices, a key Federal Reserve policy meeting and a Chinese holiday kept buyers at bay.

Even a brief dip below $1,300 an ounce and a 1-percent fall earlier in the week failed to attract buyers as they chose to wait for the Fed's decision on whether it would taper stimulus from this month.

However, the central bank surprised investors by saying it would stick to its stimulus measures, postponing a wind-down of its $85-billion monthly bond purchases and pushing gold prices higher by $55 an ounce in a single trading session - again discouraging buying.

"There has only been investment buying because of the Fed decision. There is no physical interest," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

Premiums in Hong Kong - the main supplier to second biggest gold consumer China - fell to $1.50 an ounce over London spot prices from $2.50 last week.

Gold prices in Tokyo were either consistent with global prices or at a slight discount.

Premiums have been falling over the last few weeks due to a seasonally quiet summer period and weak currencies in emerging economies.

Bullion, which has dropped nearly 20 percent this year in anticipation of a tapering in U.S. stimulus, has gained about 3 percent this week - its biggest weekly percentage gain in five weeks. (GOL/)

"Just as the monetary indicators are turning positive, physical demand - a mainstay of the market through the summer - is turning less supportive," HSBC analysts wrote in a note on Thursday.

"The recent dip below $1,300 did not trigger a surge in physical demand. Without robust physical demand, gold's upside may be limited."

China was closed for a two-day holiday from Thursday. Traders said they were not too optimistic about strong buying when the country's markets opens on Monday.

In Singapore, premiums were stable at $1-$1.50 an ounce, with some dealers seeing an increase in demand when prices fell below $1,300.

Long-term investors were buying bullion regardless of price movements, said Victor Foo, chief executive of the Singapore Precious Metals Exchange, an online trading platform.

"Despite the volatility, we have been getting more volumes via the exchange. Volumes have been pretty consistent," Foo said.

"We are getting only buy orders. No one wants to sell." (Reporting by A. Ananthalakshmi)