Gold settles modestly higher ahead of FOMC verdict

October 28, 2014

San Francisco (Oct 28)  Gold logged a slight gain on Tuesday as softer than expected U.S. data pressured the dollar, but moves were muted ahead of a closely-watched Federal Reserve statement.

The Fed is tipped to announce the end of its massive bond-buying stimulus program, known as quantitative easing (QE), at the conclusion of the two-day meeting on Wednesday.

Ahead of that, gold has been pushed higher by a drop in the dollar versus the euro after the U.S. Commerce Department said orders for big-ticket items like airplanes and consumer electronics fell 1.3 percent last month.

U.S. gold futures for December delivery closed 10 cents higher at $1,229.40 an ounce. Meanwhile, spot gold was up 0.3 percent at $1,230 an ounce.

While the durable goods data helped gold vault above $1,230 an ounce, ahead of tomorrow's FOMC, I do not think we can get out of the current range, MKS' head of trading Afshin Nabavi said. "It's the euro and the stocks which are leading, for the time being."

In addition to the end of QE, investors will be watching the Fed's statement for signals on the timing of any interest rate increase and its view on the global economy.

The Fed is expected to reinforce its stated willingness to wait a long while before increasing interest rates after a volatile month in financial markets that saw some measures of inflation expectations drop worryingly low.

A delay in any rate rise could boost gold, a non-interest-bearing asset.

Gold has gained nearly 4 percent on fears of a global slowdown since dropping below $1,200 this month.

Overnight in Asia, some buying out of China lifted gold from its early lows at $1,222.20 an ounce, its weakest since Oct. 15.

"There were some stops triggered once we breached yesterday's low, but China walked in and pushed up gold," one Hong Kong trader said. "People are nervous ahead of the FOMC and big position changes are unlikely. For the moment, I think we will hold between $1,220 and $1,240."

Data on Monday showed China's net gold imports from main conduit Hong Kong jumped to a six-month high in September as the world's biggest consumer stocked up ahead of its National Day holiday.

But imports have slowed since the holiday, traders said, suggesting that gold may lose this source of support.

Source:  Reuters

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