Gold price treads water ahead of US Fed meeting

London (Sept 14)  Gold prices edged slightly higher on the London spot market on Monday, with the price of the metal hovering above negative territory as some investor's become nervous about a potential rate rise at this week's meeting of the US Federal Reserve.

Spot gold was trading up 0.1 per cent at $US1,107.99 a troy ounce, trading within a very narrow $US5 range between $US1,104.95 an ounce and $US1,109.77 an ounce.

The Federal Open Market Committee meet on Thursday, and an interest rate rise could be on the cards for the first time in almost a decade.

"There are heightened uncertainties about the Fed decision," said Barclays in a research note. "We expect lower [gold] trading activities and a sideways market before the meeting."

Gold becomes less attractive against interest-paying securities, such as Treasury's, when rates rise. Furthermore, a rate increase would likely strengthen the greenback, which would be bad news for this dollar-denominated metal.

Most market participants believe the Fed is more likely to make a move on rates in December and beyond, rather than this week. But ahead of that decision, prices are seen to trade within a narrow range.

"The uncertainty which will continue until this announcement is made should prevent the gold price from making any significant gains in our opinion, meaning that it will probably tread water for the most part," Commerzbank said in a note.

Among the other precious metals, spot silver was down 0.9 per cent at $US14.465 an ounce, spot platinum was down 1.1 per cent at $US957.91 an ounce and spot palladium was down 0.4 per cent at $US589.52 an ounce.

Source: Business-Spectator