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Gold locked below $1,300 as market braces for Fed meeting

Reuters  |  LONDON 

By Peter Hobson

LONDON (Reuters) - Gold prices remained locked just below $1,300 an ounce on Tuesday as investors waited for clues on the pace of U.S. interest rate rises from a Federal Reserve meeting this week.

A Fed statement and press conference expected from 1800 GMT on Wednesday could push gold out of the tight range of about $1,290 to $1,305, in which it has been trapped since mid-May.

Gold is highly sensitive to interest rates because higher rates push up bond yields, making non-yielding gold less attractive, and tend to strengthen the dollar, increasing the cost of gold for buyers using other currencies.

Investors expect the Fed to increase rates on Wednesday but will be looking for hints at future policy. A more aggressive stance on monetary tightening would hurt gold.

"We are waiting for the FOMC," said Ole Hansen, referring to the Fed's policy committee.

Gold prices have tended to fall ahead of previous rate rises but recover afterwards, he said. "We're still erring towards the potential for a move higher here."

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Spot gold fell by 0.2 percent to $1,297.31 an ounce by 1328 GMT, while U.S. gold futures for August delivery dropped 0.2 percent to $1,301.10.

U.S. bond yields had edged higher and the dollar was flat against a basket of major currencies.

Adding to the wait-and-see mood were expectations that the will signal a winding down of its vast bond-buying programme at a meeting on Thursday. This would be likely to help gold by boosting the euro and weakening the dollar.

Japan's central will also meet on June 14-15.

Gold did not react strongly to a pledge by the leaders of the and to work towards complete denuclearisation of the

The joint statement signed at the end of a summit in gave few details on how that goal would be achieved.

Gold is traditionally used as a safe place to invest during times of uncertainty, and growing tensions over have added to demand.

In other precious metals, silver was down 0.2 percent at $16.85 an ounce after hitting a seven-week high of $16.95 on Monday.

Platinum rose by 0.2 percent to $905.60 and palladium dipped by 0.1 percent to $1,020.72.

(Additional reporting by and in Bengaluru; Editing and David Goodman)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Tue, June 12 2018. 20:20 IST