Gold trades near three-week low on higher risk appetite as US Fed meets

[BENGALURU] Gold prices on Wednesday were near a three-week low hit in the previous session as investors sought higher returns from riskier assets and the dollar firmed as markets waited for cues that the United States may raise interest rates.

Spot gold was down 80 cents at US$1,256 per ounce, as of 0327 GMT. Bullion on Tuesday hit US$1,251.37 per ounce, its lowest since April 10.

US gold futures were little changed at US$1,257.30 an ounce.

Asian stocks followed global indexes higher on Wednesday, as strong earnings and manufacturing data boosted risk appetite.

"Risk being put back on the table is weighing on gold," MKS Pamp Group trader Jason Cerisola said.

The US Federal Reserve concludes its two-day meeting later on Wednesday and is largely expected to hold interest rates steady. The focus will instead be on language about future increase.

Higher rates would reduce demand for non-interest bearing gold and would also make the US dollar-denominated metal more expensive for buyers paying with other currencies.

"The Fed meeting is the next likely catalyst for gold. There is a good chance that gold will stay range-bound around US$1,245-US$1,265 for sometime unless the markets take a major lead out of the meeting," said Jordan Eliseo, chief economist with ABC Bullion, Australia.

"Global tensions regarding North Korea has dissipated a bit and that's why we have seen a pull back in prices, which has been a healthy one as the markets looked a bit over extended," Mr Eliseo said.

Spot gold may retest a support at US$1,249 per ounce, with a good chance of breaking below this level and falling to the next support at US$1,228, according to Reuters technical analyst Wang Tao.

Expectations that the Fed will signal a June rate increase later in the session lifted the US dollar.

The US dollar was steady at 111.97 yen early on Wednesday, after touching a six-week high in the previous session.

"If the Fed mirrors the stance of what other central banks have been doing over the past week and tacks to a more accommodative stance, we could see gold experience something of a bounce," INTL FCStone analyst Edward Meir said.

Silver edged up 0.4 per cent to US$16.87 per ounce, after hitting a three-month low at US$16.75 in the previous session.

Platinum was mostly unchanged at US$922.50 per ounce. It hit a near four-month low of US$919 in the previous session.

Palladium rose 0.4 per cent to US$818.50 per ounce.

REUTERS