Gold makes modest gains ahead of FOMC meeting
NEW YORK (Sept 17) Gold remained at the lower end of its recent range on Tuesday morning ahead of a decision from the Federal Open Market Committee (FOMC) on the future of its easing measures.
Spot gold was last at $1,318.90/1,319.70 per ounce, up $5.15 on the previous session's close but still down $8.65 or more than 0.5 percent so far this week.
"Markets await the outcome of the FOMC meeting on Wednesday, with the balance of risks for gold now skewed towards a ‘dovish’ Fed, which would spark short-covering," ANZ said.
The tapering of the US central bank’s quantitative easing measures was expected to be confirmed at this week's two-day FOMC meeting - a cut of around $10 billion to its bond purchases from the current monthly rate of $85 billion is widely expected.
Yesterday, hopes of a more dovish stance by the Fed were boosted after front-runner Larry Summers withdrew from the race to replace outgoing chairman Ben Bernanke. Summers had been seen as a more hawkish candidate and was President Barack Obama's favourite.
"According to the financial media, the remaining main contender for the job, Fed vice chairman Janet Yellen, is widely seen as a more dovish candidate," HSBC analyst James Steel said.
Accommodative measures from the US central bank are supportive of gold because extra liquidity tends to debase the dollar and could be interpreted as creating future inflationary risks.
In eurozone data today, the July current account was in a 16.8-billion-euro surplus, down from 19.8 billion euros in June and below the forecast of 18.3 billion euros. The region’s trade balance fell to 11.1 billion euros from 13.5 billion euros and undershot the expected 15.3 billion euros.
But eurozone ZEW economic sentiment for September at 58.6 was far above the forecast 47.2 and the previous month’s 44.0 and German ZEW Economic Sentiment at 49.6 beat both the forecast 45.3 and August’s reading of 42.0.
US CPI and housing numbers are due for release this afternoon. Still, data is unlikely to have a significant impact today - it is likely to be overshadowed by tomorrow's FOMC statement.
In currencies, the euro added just more than a tenth of a cent against the dollar to 1.335. And in equities, the FTSE 100 is down 0.3 percent and the Dax slipped 0.1 percent, giving up some of yesterday’s gains.
In the rest of the complex, silver was up 21 cents at $22.01/22.06 per ounce, with platinum gaining $10 to $1,442/1,447 and palladium lifting $3 to $705/711 despite a slump in European car sales - new registrations in the year to the end of August are down 5.2 percent at 7,841,596 units, according to European Automobile Manufacturers Association data.
