Gold Steady Ahead of March FOMC

Gold prices were little changed on Monday as the prospect of imminent interest rate rises kept them near the five-week lows touched last week, while elections in Europe created uncertainty and fueled investor buying.

Spot gold was down 0.01 percent at $1,204.30 an ounce by 3:08 p.m. EST (1908 GMT). That compares with $1,194.55 last Friday, its lowest level since Jan. 31. U.S. gold futures settled up 0.1 percent at $1,203.10.

Investors are focusing on Wednesday’s Dutch elections. The chance of a eurosceptic party coming to power in the Netherlands is seen as small but a strong election performance could fuel speculation of a surprise result in French presidential elections in April and May. Wednesday is also the second day of the U.S. Federal Reserve’s two-day meeting. The widely expected decision to raise rates could boost the U.S. currency, which when it rises makes dollar-priced commodities more expensive for non-U.S. firms. “A rate rise from the Fed is pretty much priced in, we’re probably going to see two more hikes this year,” said Oxford Economics analyst Daniel Smith. “A period of higher rates will tend to mean pressure on gold prices.”

The statement from the Fed, due to be released Wednesday at 2 p.m. (1800 GMT) followed by a briefing at 1830 GMT, will be scrutinized for any changes in thinking among policymakers.

“Now, the debate shifts to Fed dots,” said Wayne Gordon, analyst for UBS Wealth Management, retaining a long view and target price for gold at $1,300 per ounce.

via Kitco

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza