Gold steadies on soft dollar ahead of Fed rate meeting

[LONDON] Gold steadied on Tuesday after two sessions of losses, as the dollar and shares eased ahead of a US Federal Reserve policy meeting that may push back expectations for when US interest rates will start to rise.

The Fed starts its first two-day policy meeting of the year later on Tuesday and investors expect it to acknowledge the uncertain global outlook and stick to its promise to be patient on tightening.

Spot gold was up 0.1 per cent at US$1,281.70 an ounce by 1249 GMT. The metal had fallen 1.6 per cent in the previous two sessions on strong equities and uncertainties over the Greek election. Gold hit a five-month high of US$1,306.20 on Thursday.

US gold futures for delivery in February were up US$2.60 at US$1,282.10 an ounce.

The dollar fell 0.4 per cent against a basket of leading currencies, while renewed concerns over Greece halted a rally in European stock markets. "Gold in the last few weeks was lifted by global economic concerns and although we've seen some profit-taking, it seems to be well bid around the US$1,280 area," Societe Generale analyst Robin Bhar said.

"The FOMC (Federal Reserve's Federal Open Market Committee)meeting could give a bit of a boost if the Fed acknowledges the global ... headwinds and that inflation is not a problem."

The Fed's timetable remains for an increase in rates by mid-year, a move that could further boost the dollar and hurt bullion, a non-interest-bearing asset.

In other news, the Netherlands raised its gold holdings for the first time in 16 years in December, while Russia extended its purchases of the metal into a ninth straight month, data from the International Monetary Fund showed.

Holdings in SPDR Gold Trust, the top gold ETF, rose 0.24 per cent to 743.44 tonnes on Monday.

In the physical markets, buying has slowed due to higher prices, with premiums in major trading hubs easing.

In Singapore, premiums have fallen to between 70 cents and US$1 an ounce, compared with US$1.20 earlier this month. In Hong Kong, premiums were at 50 to 70 cents an ounce, down from US$1 two weeks ago.

China's gold imports from Hong Kong fell by nearly a third to 813.13 tonnes in 2014, data showed on Tuesday.

The upcoming Lunar New Year holiday, however, is generating demand that is expected to remain robust until mid-February, traders said.

Among other precious metals, spot silver was unchanged at US$17.86 an ounce. Palladium was also up 0.1 per cent at US$780.50 an ounce, while platinum rose 0.8 per cent to US$1,258 an ounce.

REUTERS