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Gold remains weak before Fed`s annual meeting

Publish Date30/08/2012 02:30:53 PM

Last Update31/08/2012 10:29:25 AM

Gold remains weak before Fed`s annual meeting

Gold has ran out of last week`s momentum since the start of this week, trading in tight range of $1,660-70s and chained apparently by growing uncertainty about the prospects of global economic growth amid a broad state of anticipation for a speech by U.S. Federal Reserve Chief on Friday.

Spot gold was up 0.13 percent at $1,661.25 an ounce at 09:43 a.m. in New York, after the metal was poised to reverse yesterday`s slide. Gold has gained more than 2 percent since the minutes of the Fed`s last meeting signaled the central bank may consider additional monetary easing "fairly soon" unless the economy picks up substantially.

The inverse relationship between bullions and the U.S. currency is relatively doing its part in keeping gold and other precious metals as well in tight range as investors awaited any hints from the Jackson Hole meeting.

The U.S. Dollar Index (USDIX), which tracks the performance of the greenback against a six-currency basket, stood low at 81.45 compared with the day`s opening of 81.54. Meanwhile, the USDIX recorded an intraday high of 81.59 and low of 81.40. The euro was up slightly at $1.2545 from $1.2529.

Good signs would hurt the greenback keeping the dollar into favor while support growth-linked currencies such as the euro, which has been chained as well by speculation the European Central Bank will unroll a promising bond-buying plan to shore up borrowing costs in Spain and Italy.

Lack of clarity about the outlook of central banks and its stimulus plans have well weighed on gold prices, where it remains unclear whether the Fed will see a good reason to hint another round of quantitative easing as it did back in 2010, given recent signs the economy is adding a little bit of steam.

Gold will remain under further pressure still if policymakers outlook falls below market expectations, however additional monetary accommodation from the Fed`s would maintain pressure on long-term interest rates, and sharply weaken the U.S. dollar, keeping gold into favor as a hedge against inflation.


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