Gold stalls for Fed direction on tapering

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Gold prices were steady on Wednesday as investors steered clear of making big bets ahead of expected cues from the U.S. Federal Reserve on the next step in its tapering strategy.

Spot gold was little changed at $1,772.90 per ounce by 10:15 am EDT (1415 GMT), while U.S. gold futures eased 0.3% to $1,773.70.

The sentiment is nervous and quiet as markets remain in “wait-and-see” mode ahead of the Fed announcement, Saxo Bank analyst Ole Hansen said.

In case the central bank “expresses a bit of a concern for growth starting to slow down, it could be taken as a positive for gold, because that could indicate the Fed will not be hitting the brakes as hard as the market would have thought,” Hansen said.

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The Fed policy statement, due at 2 p.m. ET (1800 GMT), is also expected to forecast its interest rate projections for as far out as 2024 for the first time. Fed Chair Jerome Powell will hold a news conference after the statement.

Gold is viewed as a hedge against higher inflation, but a Fed rate hike would dull bullion’s appeal as that would increase the opportunity cost of holding the non-yielding metal.

The consensus among economists polled by Reuters is for rates to remain near zero until 2023, but more than one-quarter of respondents in the September survey forecast the Fed raising rates next year.

“The markets are already pricing in an increasingly hawkish outcome and the nuances will be in (Powell’s) press conference,” StoneX analyst Rhona O’Connell said.

Worries over a possible default by China’s No. 2 property developer, Evergrande, drove some safe-haven inflows into gold over the past couple of sessions, analysts said, but those jitters have since eased following a deal with bondholders.

Elsewhere, silver climbed 1.4% to $22.79 per ounce, while palladium gained 5.9% to $2,017.97.

Platinum rose 4.5% to $996.34. (Reporting by Arundhati Sarkar in Bengaluru; Editing by Aditya Soni)