June 12, 2018 / 10:35 AM / 4 months ago

PRECIOUS-Gold locked below $1,300 as market braces for Fed decision

    * Fed rates decision due from 1800 GMT on Wednesday
    * Investors seeking clues on Fed policy outlook
    * European, Japan central banks also meet this week
    * Little reaction from U.S.-N.Korea agreement

 (Updates prices; adds comment, byline; changes dateline to NEW
YORK)
    By Renita D. Young and Peter Hobson
    NEW YORK/LONDON, June 12 (Reuters) - Gold prices remained
locked just below $1,300 an ounce on Tuesday as investors waited
for clues on the pace of U.S. interest rate rises following the
impending conclusion of a Federal Reserve policymaking meeting. 
    A Fed statement and press conference expected from 2 p.m.
EDT (1800 GMT) on Wednesday could push gold out of the tight
range of about $1,290 to $1,305, in which it has been trapped
since mid-May. 
    Gold is highly sensitive to higher interest rates which can
boost bond yields, making non-yielding bullion less attractive
to investors, and could strengthen the dollar, increasing the
cost of gold for buyers using other currencies.
    Investors expect the Fed to raise rates on Wednesday but
will be looking for hints at future policy. A more aggressive
stance on monetary tightening would hurt gold.             
    "We are waiting for the FOMC," said Saxo Bank analyst Ole
Hansen, referring to the Fed's policy committee. 
    Gold prices have tended to fall ahead of previous rate rises
but recover afterwards, he said. "We're still erring towards the
potential for a move higher here."
    Spot gold        fell 0.4 percent at $1,294.96 per ounce by
1:35 p.m. EDT (1735 GMT), earlier hitting $1,292.60, a one-week
low. U.S. gold futures         for August delivery settled down
$3.80, or 0.3 percent, at $1,299.40 per ounce. 
    U.S. bond yields edged higher and the dollar was slightly
higher against a basket of major currencies.                    
    Adding to the wait-and-see mood were expectations that the
European Central Bank would signal a winding down of its vast
bond-buying program at a meeting on Thursday. This would be
likely to help gold by boosting the euro and weakening the
dollar. 
    Japan's central bank will also meet on June 14-15. 
    Gold did not react strongly to a pledge by the leaders of
the United States and North Korea to work towards complete
denuclearisation of the Korean peninsula.             
    The joint statement at the end of a summit in Singapore gave
few details on how that goal would be achieved. 
    Gold is traditionally considered a safe investment during
times of uncertainty, and growing tensions over Korea have added
to demand. 
    In other precious metals, silver        lost 0.2 percent
to$16.86 an ounce after matching Monday's seven-week high of
$16.95.
    "If the price were to exceed the $17 mark, this could lure
in further buyers and continue the price rise," Commerzbank said
in a note.
    Platinum        declined 1.2 percent to $893.50 per ounce
and palladium        dipped 0.4 percent to $1,018.

    
 (Additional reporting by Karen Rodrigues and Swati Verma in
Bengaluru; Editing by Bernadette Baum)
  
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