SINGAPORE: Gold inched lower on Tuesday but sentiment was underpinned ahead of a US Federal Reserve meeting where policy makers are expected to announce more stimulus measures, a move that would support gold's appeal as a hedge against inflation.
Many economists expect the Fed to announce monthly bond purchases of $45 billion after its meeting on Tuesday and Wednesday. Gold benefits from an easy monetary policy as investors fear that rampant cash printing will damage the value of fiat currencies, prompting them to seek safety in hard assets such as bullion.
Gold has risen more than 9 percent so far this year amid monetary easing policies by the world's central banks, especially the Fed and European Central Bank.
"People have realised that what the Fed has been doing is damaging to price stability," said Dominic Schnider, an analyst at UBS Wealth Management in Singapore, adding that recent jumps in US gold coins showed investors' worries about the consequences of Fed's unconventional monetary policy.
But Schnider also said he was disappointed at gold's recent performance, as neither the dragging US budget talks nor a relatively soft dollar appeared to inspire gold buying. Bullion posted two straight months of losses in October and November.
The dollar index came off its two-week high hit last week, while the euro steadied despite the political turmoil in Italy.
Spot gold inched down 0.2 percent to $1,709.04 an ounce by 0301 GMT, after rising to a one-week high of $1,717.20 in the previous session.
US gold was down 0.3 percent at $1,710.
Center>Copyright Reuters, 2012
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