Gold locked below $1,300 as market braces for Fed policy decision

NEW YORK/LONDON — Gold prices remained locked just below $1,300 an ounce on Tuesday as investors waited for clues on the pace of US interest rate rises following the impending conclusion of a Federal Reserve policymaking meeting.

A Fed statement and press conference expected from 2 p.m. EDT (1800 GMT) on Wednesday could push gold out of the tight $1,290-1,305 range in which it has been trapped since mid-May.

Gold is highly sensitive to higher interest rates which can boost bond yields, making nonyielding bullion less attractive to investors, and could strengthen the dollar, increasing the cost of gold for buyers using other currencies.

Investors expect the Fed to raise rates on Wednesday but will be looking for hints at future policy. A more aggressive stance on monetary tightening would hurt gold.

“We are waiting for the FOMC,” said Saxo Bank analyst Ole Hansen, referring to the Federal Open Market Committee.

Gold prices have tended to fall ahead of previous rate rises but recover afterwards, he said. “We’re still erring towards the potential for a move higher here.”

Spot gold fell 0.40% at $1,294.96 per ounce by 1:35 p.m. EDT (1735 GMT), earlier hitting $ 1,292.60, a one-week low. US gold futures for August delivery settled down $ 3.80 or 0.30% at $1,299.40 per ounce.

US bond yields edged higher and the dollar was slightly higher against a basket of major currencies.

Adding to the wait- and- see mood were expectations that the European Central Bank would signal a winding down of its vast bond-buying program at a meeting on Thursday. This would be likely to help gold by boosting the euro and weakening the dollar.

Japan’s central bank will also meet on June 14-15.

Gold did not react strongly to a pledge by the leaders of the US and North Korea to work towards complete denuclearisation of the Korean peninsula. The joint statement at the end of a summit in Singapore gave few details on how that goal would be achieved.

Gold is traditionally considered a safe investment during times of uncertainty, and growing tensions over Korea have added to demand.

In other precious metals, silver lost 0.20% to$16.86 an ounce after matching Monday’s sevenweek high of $16.95.

“If the price were to exceed the $17 mark, this could lure in further buyers and continue the price rise,” Commerzbank said in a note.

Platinum declined 1.2% to $893.50 per ounce and palladium dipped 0.40% to $1,018. —