Gold was little changed after the biggest intraday rally in nearly a month.
If the Fed leaves rates unchanged, the upside for gold would be limited as the move would create more uncertainty over the timing of an eventual rate hike, traders said.
Still, with employment data in the US and other economic signals generally improving, analysts and investors said they doubt the recent bump in gold prices is sustainable over the longer term, particularly since the Fed signaled that it still hopes to raise rates by the end of the year.
The Euro meantime cut its earlier jump to 3-week highs vs the Dollar on the FX market, helping the gold price in Euros recover to €1000 per ounce after dipping below that level for the third time this year.
Spot gold was up 0.8 per cent at $US1,127.80 an ounce, after rising to $US1,130.35, the highest since September 3.
Trading volume was languishing before this week’s Fed meeting, and prices had dropped to near one-month lows.
“We are negative about gold mainly because we expect lower demand from investors”.
“Ultimately, lower-for-longer on the rate front will boost precious metals”, Jordan Eliseo, chief economist at trader Australian Bullion in Sydney, said by e-mail on Friday. It rose 1.3 per cent on Wednesday in its biggest daily jump since August 20, helped by data showing U.S. consumer prices unexpectedly fell in August.
Gold surged 70 percent from December 2008 to June 2011 as central banks increased money supply on an unprecedented scale, spurring concern that inflation would quicken.
Bullion for immediate delivery rose 0.2 percent to $1,121.34 an ounce at 2:48 p.m.in Singapore, according to Bloomberg generic pricing. A hike is likely to weigh on gold, as higher rates lift the opportunity cost of holding non-yielding bullion. Platinum was up 0.7 percent at $974.74 an ounce and palladium was up 0.1 percent at $609.50.
“Gold continues to trade in a very narrow range ahead of the Fed announcement”, agreed a note from the commodities team at ICBC Standard Bank, “though the USA inflation figures…appeared to trigger a rally in silver…and lent gold some support too”.
The Fed “decided to hold off on rate hikes once again, both out of concern for the potential impact of the global market problems and the USA economy, and also due to fear of possibly exacerbating those problems”, said Brien Lundin, editor of Gold Newsletter.