Gold holds steady ahead of Fed policy statement

London (Mar 16): Gold held above US$1,230 an ounce on Wednesday as investors awaited the outcome of the Federal Reserve's latest policy meeting, which they hope will offer clues on the pace of US interest rate hikes this year.

In a statement due at 1800 GMT, the US central bank is expected to signal policymakers' willingness, or otherwise, to proceed with the rate hiking process they kicked off in December.

Since then, volatility in equities and oil prices, a raft of mixed economic data, and concerns over global growth have curbed expectations for further hikes, allowing gold to rise 16% this year.

It peaked at US$1,282.51 an ounce on Friday, but has struggled to maintain gains as traders await further clues from the Fed.

Spot gold was at US$1,232.76 an ounce at 1030 GMT, little changed from late on Tuesday, while US gold futures for April delivery were up US$2.70 an ounce at US$1,233.70.

"(Today) is all about the Fed," Ava Trade analyst Naeem Aslam said. "We are anticipating a very hawkish message from them."

Gold is highly sensitive to the prospect of rising rates, which lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

"What we are focused on right now is the feared trajectory of the dollar, which looks very bullish," Aslam said. "This is not such good news for gold."

Fed policymakers are expected to leave short-term interest rates unchanged but also to signal that a rate hike is not too far off as long as the job market and inflation continue to improve.

The dollar rose against a basket of currencies as investors positioned for fresh guidance from the bank. Any signal that there is more than one rate hike in store this year will likely lift the greenback further.

"Key to the policy outlook will be the FOMC's assessment of the outlook for inflation," HSBC said in a note. "If the Committee drops its expectation of 'low' inflation in the near term, it would... be a signal that the policymakers no longer see too low inflation as a barrier to a rate hike."

The world's largest gold-backed exchange-traded fund, SPDR Gold Shares, said its holdings rose 2.1 tonnes on Tuesday, after the fund reported its biggest one-day outflow since early December on Monday.

Silver was up 0.3% at US$15.30 an ounce, while platinum was up 1.5% at US$969.50 an ounce and palladium was up 0.8% at US$569.10 an ounce.

Source: TheEdge