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Gold hovered in a tight range near $1,290 an ounce on Wednesday as the focus turned to whether a weaker global economy might push back the timing of an interest rate rise expected this year from the US Federal Reserve.
The Federal Open Market Committee is scheduled to release a statement at the end of a two-day policy meeting later on Wednesday and a dovish bias could support gold, a non-interest-bearing asset.
“Our view is that the central bank will likely pay greater attention to the slowing global macro picture and reinforce its ‘go-slow’ approach on interest rates,’’ INTL FCStone analyst Edward Meir said in a note to clients.
Spot gold
Spot gold was off 0.3 per cent at $1,288.90 an ounce by 0717 GMT, after trading between $1,286.95 and $1,293.80. Bullion hit a five-month high of $1,306.20 last week.
The metal is consolidating around $1,290 ahead of the Fed’s statement, which may not offer any surprise, said Howie Lee, an investment analyst at Phillip Futures.
“I think it'll be mostly a non-event. The Fed will probably stick to the status quo and if that proves to be true, then gold should continue to hover between $1,270 and $1,290 in the near term,’’ Lee said.
Fed rate hike
Lee expects the Fed to remain on course to raise US interest rates by June, given how the world’s top economy has recovered, a trend set to continue this year.
US gold for February delivery slipped 0.3 per cent to $1,288.20 an ounce.
With the US bracing for its first rate hike in nearly a decade, gold prices are forecast to fall for a third year in a row in 2015, a Reuters poll showed. But analysts say the market should find a floor, paving the way for a recovery next year.
Lunar New Year
In the near term, gold is unlikely to fall below $1,250 because of buying interest from the Chinese ahead of the Lunar New Year next month, Lee said.
Gold imports from Hong Kong by top consumer China fell nearly a third in 2014, although the purchases were still the second highest on record at just over 813 tonnes.
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