Gold steadies in Europe

Gold steadied on Wednesday around a 5-1/2-year low hit last week, as investors awaited the outcome of a Federal Reserve meeting for cues on the timing of the first US rate rise in nearly a decade. Policymakers are likely to reaffirm that only consistent signs of a strong US economy and labour market would put them on track to raise interest rates in coming months, analysts said.
For non-interest yielding gold, higher interest rates mean prices could come under pressure. Spot gold was at $1,095.10 an ounce by 1320 GMT, little changed from late on Tuesday, while US gold for August delivery was down 0.2 percent at $1,094.50 an ounce. The metal touched $1,077 last week, its weakest since February 2010, following a sell-off on exchanges in New York and Shanghai, when investors cut their exposure on fears of further price declines.
"In my view, the market is so oversold that the next move should be higher, but right now, who knows?" LBBW analyst Thorsten Proettel said. "A lot of people have burnt their fingers with gold, and they don't want to touch it." Much of its near-term direction will depend on the Fed, and the impact of its statement on the dollar, he said. "It's possible that the Fed will give a sign that (a rate hike) will come in September, which would give gold a shock."
After breaching the $1,100 support level, gold has found it tough to recover and stay above that mark, indicating bearish investors continued to hover in the market. The dollar was unchanged against a basket of leading currencies ahead of the policy statement due at 1800 GMT. "(Gold) bounced from the low but we are little changed and waiting for the Fed's statement tonight and the second-quarter GDP tomorrow," Societe Generale analyst Robin Bhar said.
"These are the two events that should set direction for the next few weeks." European equities advanced, spurred by gains in US and Asian markets on hopes that Beijing could stem the rout in its markets without damage to the world's second-biggest economy. Holdings of the largest gold-backed exchange-traded-fund, New York's SPDR Gold Trust, were unchanged at 21.87 million ounces on Monday, the lowest since September 2008, following a seven-day slide. Spot palladium was up 0.2 percent at $620.47 an ounce and platinum was down 0.1 percent at $980.74 an ounce, both not far above multi-year lows. Silver was up 0.2 percent at $14.71 an ounce.