Gold rises ahead of Fed statement

london — Gold firmed on Wednesday, recovering from the previous session’s near twoweek low, but moves were muted as traders awaited the outcome of the Federal Reserve’s latest policy meeting.

The US central bank is widely tipped to unveil a quarter-point interest rate rise at 1800 GMT, lifting the Fed funds target rate above 1 per cent for the first time since the aftermath of Lehman Brothers’ collapse in 2008.

Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar. Markets await fresh clues on policy after scaling back their expectations for further U.S. rate hikes this year over the last few months.

Spot gold was up 0.1 per cent at $1,266.27 an ounce at 1150 GMT, having touched its weakest since June 2 on Tuesday at $1,259.16. US gold futures for August delivery were down 50 cents an ounce at $1,268.10.

Fed Chair Janet Yellen is due to hold a news conference 30 minutes after the main policy statement.

“The real surprise won’t be the rate hike, it’ll be more in the language (of the statement),” Capital Economics analyst Simona Gambarini said.

“Much of the reaction in gold prices will depend on whether there is any mention of further tightening ahead, any reassessment of current growth conditions or inflation expectations.”

“If the Fed, as we expect, is a bit more hawkish in its commentary, I don’t see gold prices trading around current levels for much longer.” — Reuters