Gold Price on the Fed Meeting

The price of gold stayed in the $1,630 per ounce range on Tuesday, deviating very little from where it began the week with both stocks and other commodities fairly flat ahead of the Federal Open Markets Committee Meeting which is scheduled to start Tuesday and conclude on Wednesday.

The price of silver traded just below $29 per troy ounce, 1.7 percent up from Monday’s low.

India, the world’s largest gold market, has registered a new high for gold based in Rupees as the Rupee fell against the dollar in currency markets.

“There has been very light buying from India, but it’s really quiet there,” said a Singapore-based dealer, who also said there has been an uptick in scrap gold buying from Thailand.

“I guess there’s a kind of wait-and-see attitude because there’s a lot of uncertainty in the market.”

“For the moment,” says Lynnette Tan, investment analyst at Philip Futures in Singapore, “we expect policy decisions from the Fed to influence the gold price more than risk appetite linked to the Euro crisis.”

The Federal Open Markets Committee of the Federal Reserve meets today and tomorrow in order to determine whether there will be any change in US policy. At the conclusion of the two-day meeting, they will make a policy announcement, which is highly anticipated by investors and analysts.

“We believe that an extension of Operation Twist could well be insufficient on its own and could thus be followed by additional easing action before long,” said Jan Hatzius, Chief US Economist at Goldman Sachs. “We would be quite surprised if we saw no easing this week,” Hatzius added.

In Europe, benchmark Spanish 10-year yields eased slightly following auction, but remained above 7 percent by midday Tuesday in London. The cost of borrowing in Spain has risen to over 5 percent for one year, up from 1.98 percent just last month.

“Spaniards, like all markets, fear the 100 billion Euro credit line is the prelude to a full bailout accompanied by much stronger conditionality,” said Nicholas Spiro, managing director of consultancy at Spiro Sovereign Strategy, which focuses on sovereign credit risk.

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