Gold prices firmed on Tuesday ahead of a meeting of the US Federal Reserve where it is expected to signal how big an interest rate cut the world’s biggest economy could take.
Spot gold was up 0.1pc to $1,427.85 per ounce as of 0954 GMT. US gold futures were up 0.6pc at $1,428.30 per ounce.
“The big question is what the tone of the Fed will be tomorrow. Interest rates are overwhelmingly likely to be cut. It’s just a question of by how much,” said Mitsubishi analyst Jonathan Butler.
“Gold is still at 6-year highs. Although it has been close to $1,450 recently, it seems to have found a level around $1,425.”
Investors awaited cues on the Fed’s two-day monetary policy meeting beginning later in the session, which is expected to result in a 25-basis point cut in interest rates. If implemented, it would be the central bank’s first rate cut in a decade.
The bank would be joining peers such as the European Central Bank in signalling the need for rate cuts. The Bank of Japan has also said it would ease “without hesitation” if the economy lost momentum in order to achieve its inflation target.
Gains in the dollar index, which touched a two-month high of 98.206 on the back of a weaker sterling, helped cap the rise in bullion.
“Liquidity is still thin as traders seem to be holding back before the Fed gives its views on monetary policy,” said Benjamin Lu, an analyst at Phillip Futures, adding that a firm dollar was putting pressure on gold prices.
US-China trade negotiations, which begin in Shanghai on Tuesday, were also in the spotlight, although expectations for progress during the two-day meeting are low, with the markets hoping the two sides can at least detail commitments for goodwill gestures.
On the technical side, spot gold remains neutral in a range of $1,412-$1,427 per ounce, and an escape could suggest a direction, according to Reuters technical analyst Wang Tao.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.83pc to 824.89 tonnes on Monday from Friday.
Among other precious metals, silver rose 0.2pc to $16.49, while platinum edged 0.2pc higher to $877.29.
Palladium dropped 0.5pc to $1,545.31 per ounce, after touching a near two-week high in the previous session.