Gold languishes near one-month lows ahead of Fed meet

 

Gold struggled to break out of a tight range near its one-month low on Wednesday, as investors waited to hear on the outlook of US interest rates from a Federal Reserve policy meet that kicks off later in the session.

FUNDAMENTALS -

* Spot gold eased 0.1 percent to USD 1,103.95 an ounce by 0037 GMT. The metal has not made any significant move this week, after dropping to a one-month low of USD 1,098.35 last week.

* US gold GCcv1 was little changed at USD 1,103.30. * Traders are waiting to see if the US central bank will raise rates this week for the first time in nearly a decade.

* The Fed will begin its much awaited two-day policy meeting on Wednesday, with a statement expected on Thursday.

* The uncertainty over the timing of a rate hike has weighed on gold all year, sending it down over 6 percent. Higher rates could dent demand for non-interest-paying bullion, while boosting the dollar.

* Data on Tuesday showed US consumer spending grew at a fairly healthy pace over the past two months, pointing to underlying strength in domestic demand that could strengthen the case for the Fed to hike interest rates on Thursday.

* While other data showed continued weakness in manufacturing, economists said that was unlikely to have much impact on the US central bank's decision.

* Expectations that the Fed would hike rates at its September meeting have eased recently due to concerns over slowing economic growth in China and volatility in financial markets.

* A rise in market expectations for US interest rates as the Fed starts to normalize policy could cut capital inflows to emerging markets by as much as 45 percent, World Bank economists said in a paper published on Tuesday.

* In other industry news, South African unions were divided on whether to accept the latest wage increase offer from gold producers, raising the risk of strikes in a sector suffering from low prices and rising costs. MARKET NEWS

* The dollar firmed in Asian trade on Wednesday, buoyed by a rise in US yields after upbeat consumer spending data kept alive hopes that the Fed would raise interest rates this week.

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