Fed decision on rates should send gold either way - likely to...

Fed decision on rates should send gold either way - likely to hold or cut rates. A cut could end the decline.


Metals - Gold falls in cautious trade ahead of Fed decision UPDATE
Tuesday April 29, 2008 05:34:08 EDT
(Updates prices, adds details) LONDON (Thomson Financial) - Gold fell in light trading Tuesday, with many investors cautiously on the sidelines ahead of a U.S. interest rate decision on Wednesday. Meanwhile, a recent pick-up in risk appetite and easing jitters over the global economy have seen the metal fall from its record $1,032.50 usd an ounce hit last month, as investors see less need to buy gold as an alternative asset. However, near-record oil prices underpinned the metal, with some investors using gold as a hedge against inflation. At 9:54 a.m., spot gold was down at $887.58 per ounce against $893.30 in late New York trade on Monday. The market is expecting the U.S. Federal Reserve to cut its funds rate by a 25 basis points to 2.0 percent and signal a desire to hold rates there for the time being. Interest rate cuts tend to weaken the dollar and boost gold. 'Both oil and the dollar will again provide much of the metal's intra-day direction, although in the short-term we expect gold to remain the most at risk to bouts of liquidation as stale longs curb their exposure and increase their risk appetite in other sectors,' said James Moore, analyst at TheBullionDesk.Com. Easing fears over the global economy, some dollar strength and rising risk appetite stalled gold's meteoric rise seen last month. 'We believe that the gold market may be approaching a turning point, if in fact it has not already passed the turning point,' said analysts at the Commonwealth Bank of Australia. As gold is back below $900, physical buyers have bought back into the market. 'Gold imports are expected to improve this month and may be at around 40-50 tonnes as prices declined to the lows and also as physical buyers who were on the sidelines bought the yellow metal to stock it up before the wedding and festival season,' said Suresh Hundia, president of the Bombay Bullion Association. Among other precious metals, platinum was trading lower at $1,946 per ounce, up from $1,965 in late trade on Monday. Platinum's sister metal palladium slipped to $427 per ounce from $436, while silver rose to trade at $16.88 per ounce from $16.87.