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PRECIOUS-Gold ticks higher, awaiting Fed rate decision, 2017 view
December 14, 2016 / 11:05 AM / 7 months ago

PRECIOUS-Gold ticks higher, awaiting Fed rate decision, 2017 view

4 Min Read

* Fed statement scheduled for 1900 GMT Wednesday
    * Expected to raise U.S. interest rates 25 bp
    * Dollar down 0.2 pct, Asian stocks firm

 (Adds quotes, updates prices)
    By Eric Onstad
    LONDON, Dec 14 (Reuters) - Gold hovered at slightly firmer
levels on Wednesday as investors kept to the sidelines,
confident that the U.S. central bank would raise interest rates
but unsure about what guidance it would give for next year.
    Bullion was supported by a softer dollar ahead of a U.S.
Federal Reserve announcement later on Wednesday that markets
overwhelmingly expect will be an interest rate hike of a quarter
percentage point.
    Markets are unsure, however, about whether the Fed will
signal more rate hikes next year. 
    "Gold is in no-man's land today, waiting for more insight
from the Federal Reserve," said Gianclaudio Torlizzi, partner at
consultancy T-Commodity in Milan.
    "In theory the Fed might surprise on the hawkish side, but
the dollar has risen to a level that already incorporates
another two hikes. So it's pretty messy, the dollar is ruining
the Fed's plan."
    Spot gold was up 0.3 percent at $1,161.33 an ounce by
1303 GMT and U.S. gold futures added 0.4 percent to
$1,163.30.     
    The Fed is due to release its latest policy and interest
rate statement at 1900 GMT with new forecasts assessing whether
the economic outlook has changed since the election. 
    Higher U.S. rates raise the opportunity cost of holding
non-yielding bullion and normally weigh on gold, but markets
have already priced in a December rise.
    The dollar index, which measures the greenback
against a basket of currencies, was down 0.2 percent at 100.87,
having slipped from this week's high of 101.78 touched early on
Monday. 
    "The market expects that maybe (Fed Chair Janet) Yellen's
comments tonight on rate hike projections for the next year will
not be too hawkish," said Helen Lau, an analyst at Argonaut
Securities in Hong Kong.
    "So that is the reason why dollar has weakened a little bit,
and that's what is supporting gold prices."
    Meanwhile, holdings of SPDR Gold Trust, the world's
largest gold-backed exchange-traded fund, are down over 9 pct
since November. 
    "People who invest in ETFs will have a relatively
longer-term view, so the current rotation is rotate out of gold
to risky assets, expecting that the U.S. economic situation will
improve," Lau said.
    Commerzbank said physical gold demand was starting to
rebound in India, which has been hit by a severe cash crunch.
    "According to industry and trade sources, Indian jewellery
manufacturers have recouped roughly half of the business they
lost following the government's demonetisation," the bank said
in a note. 
    Silver was up 0.8 percent at $17.04 per ounce after
falling nearly 1 percent in the previous session.
    Platinum rose 0.8 percent to $939.50 an ounce.
    Palladium dipped 0.3 percent to $727 an ounce, having
risen about 1 percent on Tuesday.

 (Additional reporting by Swati Verma in Bengaluru; editing by
David Evans)

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