Gold price steadies as dollar retreats, eyes likely Fed hike
London (Dec 15) Gold steadied on Tuesday, arresting the previous day's 1 percent slide as the dollar retreated, but moves were muted as traders awaited the outcome of this week's Federal Reserve policy meeting.
Gold has fallen 10 percent this year, largely on the back of expectations that the Fed is set to hike rates for the first time in nearly a decade. Rising rates increase the opportunity cost of holding non-yielding bullion.
The central bank's Federal Open Market Committee is expected to announce the rate rise at the end of its two-day policy meeting on Wednesday, but has hinted it intends to hike rates only gradually from there.
Gold could bounce higher after the move as attention switches from the timing of the first rise to the pace of tightening, analysts said.
Spot gold was at $1,062.70 an ounce at 1226 GMT, little changed from $1,062.60 late on Monday, while U.S. gold futures for February delivery were down $1.20 an ounce at $1,062.20.
"Gold continues to be trading in a range until tomorrow," MKS' head of trading Afshin Nabavi said. "I would guess the FOMC will hike by 25 basis points. I guess that much is already in the market, so gold could see a push higher and U.S. dollar probably a touch lower."
The dollar fell to a seven-week low against a basket of currencies on Tuesday, with investors cutting favourable bets in the currency on growing nervousness about the Federal Reserve's message on interest rates later this week.
Stocks rose in Europe and Asia, although volatile oil prices kept investors cautious before a widely anticipated increase in U.S. rates later in the week.
"Until the Fed reveals its decisions regarding rates we suspect the financial markets will be volatile and that volatility will seep into gold," HSBC said in a note.
Markets were awaiting U.S. inflation data later in the session for more clues on price pressures in the United States. Rising inflation could boost expectations that the Fed could keep increasing rates next year, analysts said.
Gold took little support from the physical markets. Gold prices in India swung to a discount for the first time in a month on Monday as jewellers and dealers in the world's second-biggest consumer postponed purchases ahead of the Fed meeting.
Among other precious metals, silver was flat at $13.71 an ounce, steadying after a six-day losing streak. It had dropped to $13.60 on Monday, its lowest since August 2009.
Platinum was up 0.4 percent at $848.99 an ounce, while palladium was up 1.6 percent at $552.95 an ounce.