European gold edges up

Gold prices nudged higher in Europe on Tuesday afternoon but activity was restrained before the US Federal Reserve's decision on interest rates. Spot gold stood at $432.00/432.70 by 1548 GMT compared with late New York's $431.00/431.50 on Monday when the market sank more than two percent, in one of the biggest one-day drops this year.
Dealers said funds had sold positions as the dollar hit a two-week high against the euro.
Silver held steady at $7.08/7.11.
"Yesterday's fall reflected quite a powerful rally in the dollar - now today we're seeing some book squaring ahead of the Fed meeting," David Holmes, vice-president at RBC Capital Markets, said.
The dollar was little changed near a recent two-week high against the euro as investors waited to hear whether a more hawkish tone would be injected into the Fed's statement accompanying its interest-rate decision around 1915 GMT.
The Fed is widely expected to raise interest rates by a quarter percentage point to 2.75 percent in its seventh consecutive rise.
Gold market analysts have said the rise had probably already been priced into the market.
But any increased robustness in monetary tightening could be bearish as it would tend to prop up demand for the US currency and dampen that for dollar-priced bullion.
"If the dollar's rally continues after Mr Greenspan's words tonight, the yellow metal could come under further long liquidation pressure," John Reade of UBS Investment Bank said.
HSBC metals analyst Allan Williamson said however that ongoing interest-rate rises may not be bearish for gold.
"We have noted in previous research that higher interest rates are not necessarily bullish for the dollar," he said in daily report.
Also on Tuesday, the gold unit of Russian metals giant Norilsk Nickel, Polyus, said it would sell 15 tonnes of gold in 2005 in its first direct export contract, concluded with Swiss bank Credit Suisse.
Platinum group metals continued easing, with spot platinum at $862.00/866.00 from $868.00/871.00 on Monday after last week's spike to an 11-month high at $885.
Palladium was steady at $198.00/201.00.