Metals - Gold steadies above 800 usd as investors await Fed rate verdict

Thomson Financial
Tuesday December 11, 2007

Gold held onto yesterday's gains, steadying above the 800 usd an ounce mark, as the dollar remained weak against the euro amid widespread expectations the US Federal Reserve will cut interest rates by 25 basis points this evening.

Elsewhere, gold was benefiting from a slightly stronger tone in oil. The precious metal, seen as a hedge against oil-led inflation, tends to benefit from high oil prices. It also tends to move in the opposite direction to the dollar.

'The yellow metal has closely tracked the dollar so far this morning, and is a theme likely to continue ahead of the FOMC meeting later,' said TheBullionDesk.com analyst James Moore.

He added while a 25 basis point rate cut has been largely factored in and could trigger some initial profit-taking, 'the longer-term implications of falling US interest rates will draw investors ... towards better performing assets such as gold'.

At 10.19 am, spot gold was steady at 807.95 usd an ounce, against 807.40 usd in late New York trade yesterday.

The dollar steadied at lower levels against the euro, still under pressure from expectations the Fed will cut rates again later today, further eroding the dwindling value of the greenback.

Standard Bank analyst Walter de Wet said precious metals participants will be keen to see if the Fed continues to put sluggish growth ahead of inflation fears in its accompanying statement.

Should it do this, gold could benefit from expectations of further rate cuts ahead.

Full article here.