Gold holds near $1,640 per oz ahead of Fed meeting
By Jan Harvey
LONDON (Reuters) - Gold prices steadied near $1,640 an ounce in Europe on Tuesday as a softer tone to the dollar arrested the previous session's slide, but traders largely stuck to the sidelines ahead of a key monetary policy meeting of the U.S. Federal Reserve.
Spot gold was at $1,638.30 an ounce at 6:05 a.m. EDT (1005 GMT) against $1,637.63 late on Monday, while gold futures for June delivery were up $6.40 an ounce at $1,639.00.
The Federal Open Market Committee begins a two-day meeting on Tuesday at which quantitative easing is set to be discussed. The FOMC is expected to keep interest rates on hold, but its accompanying statement will be watched for hints of fresh QE.
Ultra-loose Fed policy has kept interest rates and hence the opportunity cost of holding gold low in recent years. Expectations for further easing are supporting gold at present, but a change in that view could damage prices.
Minutes from the Fed's March meeting released this month showed support thinning for further bond purchases.
A Reuters poll last week found a slowly improving jobs market and reasonable growth at the start of the year have improved the economic outlook for 2012, reducing chances the Fed will conduct another round of bond purchases.
"Gold was negatively impacted by the Fed pushing back any ideas of further quantitative easing. With the dollar being slightly stronger, there is no reason at the moment to be interested in gold," Citigroup analyst David Wilson said.
The precious metal has shed more than 2 percent of its value so far this month after declining in both February and March, hurt by a 1.3 percent gain in the dollar as the worsening euro zone debt crisis knocked the euro. Continued...