A rise in oil prices helped lift gold on Tuesday, but dealers were cautious ahead of a Federal Reserve meeting that may determine the metal's price direction. Spot gold rose as high as $645.80 an ounce and was quoted at $644.90/645.65 by 1516 GMT, against $642.60/643.60 late in New York on Monday.
"The market now appears to wait for the outcome of the two-day FOMC meeting starting today. Crude oil remains the dominant fundamental driver for the time being," Dresdner Kleinwort said, referring to the Federal Open Market Committee. Oil prices gained more than one percent, raising gold's allure as a hedge against oil-led inflation.
Investors await the release of key US economic data, including fourth-quarter GDP figures and the Fed's rate decision on Wednesday, the Personal Consumption Expenditure inflation index on Thursday and January employment data on Friday.
"A low interest rate environment is very constructive for the market. So if the Fed is about to embark on rate cuts this year, that should be supportive for gold going forward," said Michael Lewis, head of commodities research at Deutsche Bank.
"Gold held relatively well in the face of the decline in the euro/dollar. There are some short-term risks to the downside, but by the end of the year, we are looking for gold to be trading higher," he added.
The dollar steadied before the meeting, the outcome of which investors will study for clues on whether the bank has become more optimistic on the economy after a raft of strong data. Gold often moves in the opposite direction of the dollar. Dealers remained confident about gold's long-term prospects.
"Despite a fairly neutral market balance, prospects for gold are buoyed by the combination of forecasts for dollar weakness and oil price strength," Barclays Capital said in a report. It said fabrication gold demand had been stabilising after last year's sharp fall because of volatile and high prices, while bullion supply was unlikely to see major changes.
China, a major gold consumer, managed to maintain bullion consumption at around $240 tonnes last year as growing wealth offset higher prices, Albert Cheng, Far East managing director for the World Gold Council, said. In other precious, silver rose to $13.31/13.38 an ounce from $13.14/13.21 late in New York.
In market news, Russia's Polymetal, the world's fifth-largest silver miner, said it was seeking a valuation of between $2.3 billion and $3.0 billion when it lists up to 30 percent of its shares in London and Moscow.
Platinum rose to $1,169/1,174 from $1,163/1,168 an ounce, but palladium dropped to $331/336 an ounce from $340/345 in New York. The market ignored a strike by about 3,000 workers at South Africa's Modikwa platinum mine. Company officials were hopeful it would be resolved soon.
Comments
Comments are closed.