Gold edges lower

Gold edged lower yesterday, pressured by a slightly stronger dollar, but activity was muted ahead of a Federal Reserve policy announcement that could trigger a sharp move in prices.

Investors expect the Fed to raise interest rates but want to know if it intends to tighten policy four times in 2018 or three times, as it indicated earlier this year.

A clear hint in the announcement at 1800 GMT or press conference at 1830 GMT could knock gold out of the tight range of about $1 290 to $1 305, in which it has been trapped since midMay.

More rate rises would hurt gold because they push up bond yields, making non-yielding bullion a less attractive investment, and tend to strengthen the dollar, increasing the cost of gold for buyers using other currencies.

Gold prices have tended to fall before recent U.S. interest rate rises, as investors anticipate the change, but rally afterwards.

“It might be different this time,” said Robin Bhar, head of metals research at Societe Generale.

“Forward guidance will be crucial . . .That will dictate direction in the short term.”

Spot gold was down 0.1 percent at $1 293,96 an ounce at 1151 GMT and US gold futures for August delivery fell by 0,2 percent to $1 297,50.

Reinforcing the cautious mood were policy announcements expected from the European Central Bank (ECB) on Thursday and Japan’s central bank on Friday, which could affect gold prices.

The ECB is expected to signal a wind-down of its huge bond-buying programme, which could strengthen the euro and boost gold demand in Europe.