Gold importers eye Fed, rupee for price direction

Gold traders in India sought price direction ahead of an outcome of a key US Federal Reserve policy meeting as prices were steady for the second session, near their highest level in a week struck on Monday.

Economists expect the Fed to announce monthly bond purchases of $45 billion to replace its Operation Twist programme set to expire at the end of the year, signalling the central bank will continue to pump money into the economy in the new year in a bid to bring down unemployment.

The actively traded gold contract for February delivery was 0.14% higher at Rs 31,420 per 10 grams at 1:30 pm, after hitting a high of Rs 31,455. The contract struck a high of Rs 31,559 on Monday, a level last seen on December 4.

The rupee, which traded flat on Wednesday, plays an important role in determining the landed cost of the dollar-denominated yellow metal.

"Buying has slowed... people feel prices could come down, and buying could re-emerge at Rs 31,000," said Ajit Shinde, director of Magna Projects, a wholesaler in Kolkata.

The wedding season, which started in September and peaked last month, continues until early January. Gold is an essential gift item during this season in India, the world's largest buyer of the metal.

Silver for March delivery on the MCX was 0.39% higher at Rs 62,564 per kg.