Gold price slips ahead of Fed policy statement
New York (Mar 16) Gold eased on Wednesday after data showed U.S. inflation rose last month, potentially keeping the Federal Reserve on course to raise interest rates this year, but moves were muted ahead of a pending U.S. central bank policy statement.
In an announcement due at 1800 GMT, the Fed 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 percent this year.
It peaked at $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 $1,231.56 an ounce, while U.S. gold futures for April delivery were up $1.20 an ounce at $1,230.50.
"(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.
Gold processing plant at the Olimpiada gold operation, owned by Polyus Gold International company, Russia.
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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.
Source: Reuters
