Gold steadies as investors mull possibility of hawkish Fed rhetoric

Gold steadies as investors mull possibility of hawkish Fed rhetoric

	Published : Tue, 30 Jan 2007 17:21 By : Agencies Print this Story

LONDON (AFX) - Gold held steady as investors mulled the possibility of hawkish rhetoric from the US Federal Reserve tomorrow.

Although the Fed is widely predicted to keep interest rates unchanged at 5.25 pct when its policy meeting ends Wednesday, there is some speculation that the statement accompanying its decision may warn about inflationary pressures ahead.

Investors fear the dollar may well rise as a result, pressuring gold lower in the process.

At 3.59 pm, spot gold was quoted at 645.35 usd an ounce, down slightly from 643.20 usd in late New York trade yesterday.

'It's (the market) pretty much on hold until the decision tomorrow,' said HSBC analyst, James Steel.

'There seems to be a very slight idea that there will be a slightly more hawkish tone, which would be negative for gold,' said Steel, commenting on tomorrow's Federal Reserve verdict.

Gold usually moves counter to the dollar because it is seen as an alternate investment to the US currency. Yesterday, for instance, the precious metal edged lower after the dollar hit four-year highs against the yen.

The dollar's recent strength has played a part in recent falls in gold, said Steel.

'The dollar has already been well supported and the market has backed away from 650 usd.'

Oil's fortunes have also been a factor in gold's movements as the metal is seen as a hedge against oil-led inflation.

'In the very near term you have to watch oil, the dollar is on hold... I would be inclined towards the upside (for gold),' said Ross Norman, analyst at TheBullionDesk.com.

Oil edged up today after yesterday's falls, as traders took comfort from the continued cold weather in the US Northeast, which is expected to boost heating oil demand and eat into fuel inventories.

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