Investors and traders were apprehensive about implementing big steps as the U.S. Federal Reserve begins two days of meetings on Tuesday. Once the meeting adjourns on Wednesday afternoon, chairman Ben Bernanke is likely to make a statement, which could be germane to the status of the economy-spurring stimulus program.
Markets are edgy about the prospect of the Fed announcing it will reduce the stimulus program as Bernanke said the central bank is aiming to do for the remainder of the year. He also said the Fed would like to cease the program by the end of the year.
Monetary stimulus programs flood the market with U.S. dollars, which distil the value of the greenback. In turn, the precious metal advances when the U.S. dollar slips as the two typically perform the inverse of one-another.
Advancing past $1,300 per troy ounce
The price of gold futures pushed past the $1,300-per-troy-ounce mark for the first time in about four weeks last week in the aftermath of Bernanke commentary about the need for monetary policy being necessary in the near term. He also noted that any slippage in bond purchases is not permanent but, rather, linked with the strength of the U.S.economy.
Another scenario is the U.S. Federal Reserve tapering asset purchases by the end of this year and then closing it some time in the middle of next year.
"There were initially very strong reactions to the idea of tapering … but the Fed is now trying to persuade people that ok they may taper QE3 but fundamentally that does not change the stance on monetary policy and rates will remain on hold for a protracted period," analyst Nic Brown with Natixis told Reuters on Tuesday.
At 9:27 a.m. on Tuesday, gold futures slipped 0.17 percent, a $2.30 loss to $1,325.80 per troy ounce.
Dollar's moderate climb benefits gold
The world's reserve currency pushed above its lowest level in five weeks on Monday. However, the dollar was lower in value against the shared currency of the European Union in the aftermath of the economic data showing consumer sentiment growing stronger in the euro zone this month.
Two additional central banks – the European Central Bank and the Bank of England – are set to convene policy meetings this week.
Gold futures – as well as the dollar – are likely to be impacted by additional economic data released later this week by the U.S. Second quarter U.S. growth data is scheduled to be released on Wednesday while the U.S. Labor Department is scheduled to release its July jobs report on Friday.
"If you see some more dovish comments from European central banks this week and a stronger employment number in the United States, you'll get some strengthening in the dollar and Treasury yields, which would be bad news for gold," the Nataxis analyst told Reuters.
Focus on FOMC statement
MarketWatch reports traders, analysts and investors are prepared to review the Fed statement on Wednesday with a fine-toothed comb for indications about the asset purchase program.
"We expect gold to trade towards the lower end of the $1,300-to-$1,340 range as we approach these key events," states a note penned earlier this week by commodity strategist Marc Ground with Standard Bank, pointing to the Federal Open Market Committee statement and the jobs report.
Bloomberg reports the price of gold futures has gained roughly 8.6 percent thus far this month as the yellowish metal pushes toward its biggest monthly gain since January of last year.
But questions remain as to whether bullion will be able to mark its 13th consecutive year of annual gains this year.
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