US MIDDAY: gold inches up

Gold moved up a shade early on Wednesday, but remained near last week's 5-1/2-year low, after a US Federal Reserve statement raised uncertainty about the timing of a possible interest rate hike, leaving the door open for September. Following a two-day policy meeting, Fed officials said they felt the economy had overcome a first-quarter slowdown and was "expanding moderately" despite a downturn in the energy sector and headwinds from overseas.
The statement said the US economy and job market continue to strengthen. "(The) market can't seem to decide whether the Fed has moved marginally farther away from a September hike," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York. "Will need some FOMC members' spin in the coming days for a bit more clarity."
Wong added that the statement was nearly identical to the one in June. Spot gold was up 0.14 percent at $1,096.50 an ounce at 2:41 pm EDT (1841 GMT). US gold for August delivery settled down 0.3 percent at $1,092.60 an ounce, prior to the statement. Policymakers had been expected to reaffirm that only consistent signs of a strong US economy and labour market would put it on track to raise interest rates in coming months.
For non-interest yielding gold, higher interest rates mean prices could come under pressure for gold. "In my view, the market is so oversold that the next move should be higher, but right now, who knows?" LBBW analyst Thorsten Proettel said ahead of the Fed statement. "A lot of people have burnt their fingers with gold, and they don't want to touch it."
Spot gold touched $1,077 last week, its weakest since February 2010, following a sell-off on exchanges in New York and Shanghai, when investors cut their exposure on fears of further price declines. Gold has since found it tough to recover above $1,100 an ounce, indicating bearish investors continued to hover in the market. Holdings of the largest gold-backed exchange-traded-fund, New York's SPDR Gold Trust, were unchanged at 21.87 million ounces on Monday, the lowest since September 2008, following a seven-day slide. Spot palladium was down 0.7 percent at $615 an ounce and platinum was down 0.2 percent at $983 an ounce, both not far above multi-year lows. Silver was up 0.8 percent at $14.79 an ounce.