Forexpros – Gold prices dipped in Asian trading Wednesday as investors sold ahead of the Federal Reserve’s monetary policy meeting taking place.
A decision to stimulate the economy via bond buybacks from banks could send gold soaring.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded down 0.17% at USD1,620.45 a troy ounce.
Gold hit at a low of USD1,618.35 a troy ounce and a high of USD1,623.55 a troy ounce during the session.
Gold futures were likely to test support at USD1,614.35 a troy ounce, the low from June 18, and resistance at USD1,630.85, the high from June 18.
The Federal Reserve is holding a two-day monetary policy meeting and talk is growing the U.S. central bank will take measures to bolster the economy either through outright bond purchases from banks, known as quantitative easing, or by extending a $400 billion program shuffling of its Treasury holdings, known as Operation Twist.
Under Operation Twist, the Fed sells short-dated Treasury instruments and buys longer-dated Treasurys in tandem with the aim of pushing down long-term interest rates.
Unlike quantitative easing, Operation Twist does not expand the Fed’s balance sheet.
Quantitative easing in particular would send gold soaring as it would signal the Fed is willing to make more drastic steps to steer the economy away from deflationary decline and towards investment and hiring by weakening the dollar via liquidity injections.
Gold and the dollar often trade inversely from one another.
Elsewhere on the Comex, silver for July delivery was up 0.25% and trading at USD28.440 a troy ounce, while copper for July delivery was down 0.09% and trading at USD3.423 a pound.
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