Singapore: Gold edged up on Wednesday as Japan’s aggressive monetary easing policy boosted bullion’s appeal as a hedge against inflation, although gains may be capped as stronger equities lure buyers seeking better returns.

Investors are shifting their focus to minutes from the last US Federal Reserve monetary policy meeting for insight on the Fed’s bullion-friendly bond buying programme, which sent prices to an 11-month high in October last year.

Gold had gained $2.26 an ounce to $1,586.96 (Dh5,824.14) by 0320 GMT, after hitting $1,590 on Tuesday, its highest since April 2. It has slipped around 5 per cent so far this year, after posting annual gains in the past 12 years.

“What the Fed actually releases in the minutes tonight will affect the direction of gold. Gold needs to test $1,600 before we see it trading in a higher band. If it doesn’t, there might still be a downside risk,” said Brian Lan, managing director of GoldSilver Central Pte Ltd.

“Investors will be looking out for any mention of quantitative easing. The decision on whether the Fed will continue to print money, limit the print, or slowly ease it out will definitely drive precious metals prices.”

Gold futures on Tokyo Commodity Exchange moved towards a lifetime high at 5,081 yen a gram hit in February because of a weak yen, but the climb in TOCOM failed to spur more gains in cash gold.

Korea tensions

Tokyo gold futures ignored tension between the two Koreas, dealers said, but the price gain weighed on bullion bars offered to investors. Gold bars are now at discounts of 75 cents to spot London prices in Tokyo, versus premiums of 50 cents last week.

“We are seeing buyback from the general public,” said a physical dealer in Tokyo, adding that the weaker differentials attracted buying from local investors.

“We’ve read about the missiles, but that isn’t have any impact on the market in Japan.”

South Korea has raised its surveillance of North Korea after the reclusive state moved one or more long-range missiles in readiness for a possible launch, Yonhap news agency reported on Wednesday.

US gold for June delivery was steady at $1,587.00 an ounce.

UBS and Deutsche Bank cut their 2013 gold price forecasts on Tuesday, with Deutsche lowering its price view by 12 per cent to $1,637 an ounce, saying returns from the metal this year may be the worst since 2000.