Article from – MarketWatch.com
Moming Zhou – August 12, 2009
NEW YORK (MarketWatch) — Gold futures rose on Wednesday as the U.S.
dollar fell against most of its rivals ahead of the conclusion of the
Federal Reserve meeting, boosting gold’s appeal as an alternative investment.
The Fed’s Federal Open Market Committee was to end a two-day policy
meeting later in the day. Investors waited for news on whether the Fed’s
current monetary policy will continue. Limiting gold’s gains Wednesday,
holdings in the biggest exchange-traded fund backed by gold fell to a
five-month low.
On the Comex division of the New York Mercantile Exchange, the most
active December gold futures rose $6.30, or 0.7%, to $953.90 an ounce.
The front-month August contract was also higher, up $2.30, or 0.2%, at
$948.10 an ounce.
"Gold traders [are] on hold prior to the Fed meeting," said
George Gero, a precious-metals trader for RBC Capital Markets. "A
small trading range seems likely as [the] dog days of summer are here
and momentum traders have pulled back awaiting news."
Interest-rate futures on Wednesday indicated traders no longer expect
the Fed to raise its target overnight borrowing cost for banks, known
as the federal-funds rate, by the end of this year, but still see a chance
of an increase by next spring.
Meanwhile, markets are expecting the Fed to allow its $300 billion Treasury-buying
program to end over the next six weeks.
Signs of tightening could reduce inflation worries and curb gold’s appeal
as a hedge against rising prices.
"The market is likely to remain cautious ahead of the FOMC decision," said
Suki Cooper, a precious-metals analyst at Barclays Capital, in a note. "A
more optimistic accompanying statement would be dollar-positive, which
in turn is likely to expose gold to growing downside risk."
Holdings in SPDR Gold Trust (GLD 93.25, +0.46, +0.50%) , the biggest
gold ETF, fell more than 3 metric tons to stand at 1,065.49 metric tons
Tuesday, the lowest level since
March 13. Holdings are now down nearly 70 metric tons from their record
above 1,134 metric tons hit in early June.
"With more investor redemptions expected, gold will remain at risk
to further pressure," said James Moore, an analyst at TheBullionDesk.com.
In other ETFs, holdings iShare Silver Trust
(SLV 14.29, +0.20, +1.39%) , the biggest silver ETF, stood near a record
at 8,824.67 metric tons.
Among other metals, September silver rose 23 cents, or 1.6%, to $14.575
an ounce. October platinum fell $4.10, or 0.3%, to $1,241 an ounce, while
September palladium slid $1.40, or 0.5%, to $273.75 an ounce.
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