Gold rises ahead of FOMC meeting

14 December 2010 @ 02:51 am EDT


The shiny metal advanced for the second day ahead of the Fed's two-day meeting where policy makers are expected to leave interest rate low and may add to stimulus.

The Fed aims to boost recovery that started to show some sluggishness, thus it will probably keep borrowing cost near zero which Bernanke referred recently that he may purchase bonds beyond the $600 billion QE2 announced last month.

The expected monetary decision by the Fed is putting some pressure on the dollar that fell to one-week low versus the yen.

The dollar index, which tracks the dollar movements versus a basket of six major currencies slipped to a low of 79.21 from the day's opening at 79.32 as the breach of 80.00 levels paved the way for further decline.

Accordingly, dollar-dominated commodities rose where oil soared to a high of $88.72 a barrel from yesterday's closing of $88.20, while spot gold surged to a high of $1405.70 an ounce after it recorded a low of $1393.80.

Among other precious metals, platinum inched down to $1704.70 from the day's opening at $1705.70, palladium increased to $758.20 from $757.00 and silver soared to $29.83 from $28.73, as of 07:45 GMT.

Gold, which climbed near to 30% this year, is benefiting from the dollar's decline and as an inflation hedge where the second round stimulus announced by some central banks is expected to push inflation levels higher.

In China, inflation rose to 5.1% in November from 4.4% in October to record the most rapid pace in 28 months, according to consumer prices inflation gauge.

The leap above the government's target of 3% may prompt policy makers to raise interest rate again in the coming months after raising it in October by 50 basis points.

Later in the day, UK inflation is expected to remain above the target at 3.2% in November and German investor confidence to show improvement in December.

The previous session, gold added $8.70 or 0.63% to close at $1393.89, while gold price was setin London at $1399.00 per ounce inclining from $1388.25 during the AM fixing.