Gold Ticks Higher For Second Day, FOMC Meeting In Focus

Gold Prices rose modestly on Wednesday within correctional moves ahead of the monetary policy statement from the U.S. Federal Reserve, as investors expect the Fed to keep its loose monetary policy at a meeting ending later in the day.

Investors are treading cautiously in gold markets as the statement by the Fed’s will likely offer investors more clue as to how divided the central bank is with respect to extending the accommodative policy and to what extent they will preserve the $85 billion monthly asset purchases according to current economic conditions.

nvestors as well will also be anticipating Wednesday’s preliminary data on U.S. fourth quarter economic growth, any improvement in the U.S. Gross Domestic Product (GDP) could scale back expectations for further easing from the Fed as QE start to take effect, keeping a closer tab on the labor market, the key for the Fed’s policy.

The Federal Open Market Committee (FOMC) policy statement on Wednesday is likely to provide the next short-term direction for gold, where an accommodative policy is seen positive for the metal .

Gold advanced to trade currently at $1667.97 per ounce after recording a high of $1668.64 and a low of $1662.65.

In light of the decision today investors will be waiting for nonfarm payrolls data on Friday for a closer look at the U.S. labor market. Improvement in the sector and better than expected figures will help the market to stand up and continue the optimistic start for the year which will weigh on gold as investors head to equities in particular but a weaker dollar will preserve the metal from sharp losses.

The labor market improvement is the gauge for the success of the Fed’s quantitative easing and the outlook for the economic recovery. The importance of the nonfarm payroll lies within the fact that the Fed’s explicitly tied the fate of their QE program to the improvement in the sector with the marginal barrier at 6.5% unemployment.

U.S. Unemployment rate is expected to remain at 7.8 percent in January.

Silver prices tracked the movements of gold, driving the metal for the second day higher at levels of $31.40 per ounce, after recording highest at $31.46 an ounce and the lowest at $ 31.30 an ounce.