Gold steadies as investors bet against Fed hike

By Clara Denina

LONDON (Reuters) - Gold steadied on Tuesday ahead of a two-day U.S. Federal Reserve meeting that investors are betting will leave interest rates unchanged.

Spot gold was up 0.1 percent at $1,313.68 an ounce by 1420 GMT, while U.S. gold futures were down 0.1 percent at $1,316.90.

"We are back in this pattern where the expectations about the next rate hike determine the short-term swings - when they are pushed backwards, gold rises and when they are pulled forward gold declines," Julius Baer analyst Carsten Menke said.

"The Fed will prepare markets for a rate hike, possibly in March next year, expectation of which will be positive for the dollar and in turn negative for gold."

 

Investors will listen closely to Fed Chair Janet Yellen's speech at the end of the meeting on Wednesday for any hint that the central bank could raise rates before the end of the year.

A range of mixed economic figures and conflicting remarks by key Fed policymakers have kept investors guessing over the timing of the next U.S. rate increase.

Only a 12 percent chance of a rate rise is priced in now, compared with 24 percent last week, CME FedWatch said.

Rising U.S. interest rates increase the opportunity cost of holding non-yielding bullion and boost the dollar, making gold more expensive for buyers holding other currencies.

The dollar was up 0.1 percent against a basket of six main currencies as investors also awaited the outcome of a Bank of Japan policy meeting this week.

Japan's central bank also meets on Tuesday and Wednesday, and could make negative interest rates the primary focus of its monetary policy, moving away from quantitative easing.

Spot gold looks neutral in a range of $1,313 to $1,319 an ounce and an escape could point to a direction, Reuters technical analyst Wang Tao said.

In other news, Swiss gold imports from Hong Kong last month hit their highest since records began in 2012, while combined shipments to Hong Kong and China hit their lowest since April, data from the Swiss customs bureau showed on Tuesday.

Spot silver was unchanged at $19.14 an ounce, after a near 2 percent increase in the previous session.

Platinum was down 0.1 percent at $1,022 an ounce and palladium rose 0.2 percent to $683 an ounce, extending a 2 percent increase on Monday.

(Additional reporting by Swati Verma and Nallur Sethuraman in Bengaluru; Editing by David Goodman and Louise Heavens)