Metals - Gold steady as investors await US Fed rate verdict

Metals - Gold steady as investors await US Fed rate verdict

	Published : Tue, 11 Dec 2007 16:02 By : Agencies Print this Story

LONDON (Thomson Financial) - Gold remained steady even as the dollar recovered some of yesterday's losses, as players awaited this afternoon's widely anticipated rate verdict from the US Federal Reserve.

Although the Fed is expected to cut rates by 25 basis points, it is unclear what the immediate impact on gold and the dollar will be.

While a rate cut should weigh on the dollar and thereby increase the appeal of gold as an alternative currency, there are those who say the cut has been widely priced in by the market.

In addition, players will be focused on the statement accompanying the Fed rate verdict.

Should the statement highlight risks to economic growth over inflation concerns, the dollar might fall sharply on expectations of further rate cuts ahead.

On the other hand, oil prices, the other fundamental driver of gold, could also take a turn for the worse if the Fed statements sparks worries over the oil demand outlook.

This could weigh on gold, as it reduces the appeal of the metal as a hedge against oil-led inflation.

'Crude oil might head lower again and could drag gold lower,' noted Dresdner Bank analyst Peter Fertig.

At 3.19 pm, spot gold was steady at 807.75 usd an ounce, against 807.40 usd in late New York trade yesterday.

Analysts said that over the longer term, gold will head higher irrespective of today's rate decision, noting also it is steadying now even as the dollar has recovered some of yesterday's losses against the euro.

Kitco analyst Jon Nadler said current worries that the US economy could slip into recession next year on account of the housing and credit crisis are reason enough for players to buy gold.

'Even if they do not buy the metal with the expectation of sure-fire profits to come, the least they might get out of their decision to purchase (gold) now, is a better night's sleep. Which, as we have always maintained, is what gold is really all about,' he said.

On a nearer term view, however, analysts say gold remains at risk of further profit-taking as players square positions ahead of the year-end. It fell to 777 usd earlier this month on end of year profit taking and weakness in oil.

The fall took gold sharply off a 28-year high of 845 usd hit in November - a peak just 5 usd away from the all-time record of 850 usd an ounce struck in January 1980.

Among other precious metals, platinum was flat at 1,464 usd yesterday, while its sister metal palladium fell to 341 usd from 344 usd.

Silver was trading at 14.63 usd an ounce against 14.65 usd.

maytaal.angel@thomson.com

ma/ra

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