Gold prices were slightly higher on the London spot market on Wednesday, as traders remained cautious amid expectations that the Federal Reserve would announce a US interest rate increase later in the day.
Spot gold was up 0.18 per cent at $US1,063.50 a troy ounce in morning European trade, sticking within a narrow $US6 range.
Metals have been falling since the peak of the commodities boom in 2011, with investors reacting to oversupply issues and falling demand growth in key buyers such as China.
However, since the middle of the year, fluctuations in US interest rate expectations have dominated trade in precious metals.
“Gold ... [is trading] sideways ahead of the Fed rise,” said SP Angel, a brokerage, in a note.
The two-day Federal Open Market Committee meeting concludes later on Wednesday, and the market is convinced the Fed will raise US interest rates.
Most market participants expect an increase to boost the US dollar, causing metals to trade even lower - a gaining greenback makes them more expensive to buy for other currency-holders.
For others in the market, however, the first rate rise by the US central bank in almost a decade may be a non-event for gold.
“The gold market has already priced in an interest-rate hike, so gold should no longer be affected too much if this does happen,” said Commerzbank AG in a note.
According to the bank, movement in gold will be more pronounced should rates unexpectedly remain unchanged. Market participants will then be more concerned with the pace of subsequent rate rises in 2016.
Among the other precious metals, spot silver was up 0.6 per cent at $US13.833 an ounce and spot platinum was up 1.7 per cent at $US864.72 an ounce, while palladium was flat at $US565.88 an ounce.
