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SINGAPORE. – Gold ticked higher yesterday as investors awaited the conclusion of a Federal Reserve policy meeting at which the US central bank is expected to raise rates for the first time in nearly a decade. The Fed, which began a two-day policy meeting on Tuesday, is widely expected to raise rates by 25 basis points, ending eight years of loose monetary policy. Higher rates would dent demand for non-interest-paying gold, while boosting the dollar.
The Fed decision was due to be released on Wednesday at 1900 GMT. Spot gold rose 0,4 percent to $1 064,60 an ounce by 0636 GMT, after closing lower in the last two sessions. “Gold may drop in an initial reaction to a hike. But as the hike is generally expected, any selloff may be relatively short-lived,” said HSBC analyst James Steel.
However, a hawkish tone along with the rate hike could trigger a strong rally in the dollar that could make it tough for gold to recover, Steel said. Investors have sent gold down 10 percent this year in anticipation of higher rates and the dollar strength. The metal fell to near-six-year lows earlier this month. – Reuters.
Online Reporter