Gold holds steady in rangebound trade ahead of Fed announcement

Gold futures were steady in rangebound trade during European morning hours on Thursday, as investors looked ahead to the conclusion of the Federal Reserve’s policy-setting meeting later in the day, amid hopes of further easing. On the Comex division of the New York Mercantile Exchange, gold futures for October delivery traded at USD1,730.15 a troy ounce during European morning trade, easing down 0.05%. Prices were stuck in a tight trading range of USD1,728.85 a troy ounce, the daily low and a session high of USD1,732.95 a troy ounce. Gold futures rallied to USD1,746.55 a troy ounce on Wednesday, the highest since February 29. Gold prices were likely to find support at USD1,688.85 a troy ounce, the low from September 6 and near-term resistance at USD1,761.85, the high from February 21. Markets eyed the outcome of the Fed’s two-day policy meeting later Thursday, amid growing speculation that the U.S. central bank may announce a third round of bond purchases, or quantitative easing, to boost sluggish growth in the world’s largest economy. Market expectations of a QE3 announcement this week increased after last Friday’s weaker-than-expected jobs report and following a speech from Fed Chief Ben Bernanke at Jackson Hole last month. Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would pump more money into the financial system. The precious metal has rallied on past monetary stimulus measures. Investors tend to flock to gold on fears that excess liquidity would erode the value of fiat currencies and spark inflation. The precious metal received an additional lift from a weaker U.S. dollar. The euro remained supported near a four-month high against the greenback after Germany’s constitutional court approved the country’s participation in the euro zone’s bailout fund, the European Stability Mechanism on Wednesday. The ruling cleared the way for Germany’s president to ratify the ESM under certain conditions, allowing the European Central Bank’s bond purchasing program to proceed. The German court said that the country’s liability to the EMS must not exceed EUR190 billion without the approval of the lower house of parliament and said that both houses of parliament must be kept informed about decisions relating to the ESM. Gold prices often move inversely to the U.S. dollar, as gold becomes less expensive for buyers using other currencies. Elsewhere on the Comex, silver for December delivery shed 0.7% to trade at USD33.06 a troy ounce, while copper for December delivery shed 0.35% to trade at USD3.679 a pound.

Courtesy: ForexPros