NEW YORK (TheStreet ) -- Gold prices were moving sideways Wednesday as a weaker U.S. dollar and book-squaring led investors to buy the precious metal, but improving risk appetite weighed on prices.
Gold for August delivery was slipping $4.30 to $1,236.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,247.40 and as low as $1,236. The U.S. dollar index was slipping 0.09% to $86.02 while the euro was losing 0.09% to $1.22 against the dollar. The spot gold price Wednesday was down more than $3, according to Kitco's gold index.
Gold prices were reversing earlier gains as investors stayed optimistic ahead of the Federal Reserve's rate decision. Gold prices were rising more than $5 earlier in trading as investors made another jump to safety as global markets fell following a late day selloff in the U.S..
Gold prices will most likely stay volatile for the rest of the week. Investors are now turning away from gold to buy riskier stocks but traders reallocating funds in their portfolio headed into the third quarter could use gold as a secure place to stash their money. This tug-of-war will create a tight trading range for gold prices.
"I'm back to $1,175 to $1,250," says George Gero, vice president of global futures at RBC Capital Markets. "I had raised [my price target] to $1,300 ... [because] you had a lot of weekenders coming into the market that were looking for short-term gains."
Helping to support higher prices are dollar weakness and bargain-hunting. A lower U.S. dollar makes gold less expensive to buy in other currencies. Gold prices have also fallen 1.6% since Monday after touching an intraday high of $1,266 an ounce and investors have been taking advantage of dips to buy gold at a "discount." The popular gold exchange-traded fund, SPDR Gold Shares(GLD), added more than 5 tons Tuesday as the Dow Jones Industrial Average fell almost 150 points.
Gold prices will look for more direction Wednesday from the Federal Reserve and the results of its two-day FOMC meeting . Rates are expected to remain between 0% and 0.25%, but the language will be key. The Fed has been standing by its rhetoric that rates will stay low for an "extended period of time" and any change will prove pivotal for gold prices. Low rates mean more "free money" and raise the likelihood of inflation in the future. This is the first rate meeting since the weak May job number and the ballooning European sovereign debt crisis.
