Gold over 28-yr peak ahead of Federal Reserve meet

Dear readers,

The spot gold price fell off its 28-year high last night ahead of the upcoming Federal Reserve meet, expecting a likely cut in the U.S. interest rates.

Personally, I plan to top-up my gold savings account to lock-in on the fallen gold price and wait for the results from the Federal Reserve meet to determine if I should top up again, should the gold price correct further.

Check out this article to understand more:

UPDATE 5-Gold off 28-yr peak ahead of Federal Reserve meet
Tue Oct 30, 2007 3:40 PM GMT
By Atul Prakash

LONDON, Oct 30 (Reuters) – Gold backed away from 28-year highs on Tuesday as investors took profits ahead of a likely cut in U.S. interest rates.

The U.S. Federal Reserve is widely expected to lower rates by a quarter-point on Wednesday in a move designed to prevent damage to the U.S. economy from a deteriorating housing sector — a move often seen negative for the dollar.

The dollar earlier benefited from a Wall Street Journal report saying a Fed rate cut this week is no sure thing and officials were not seriously considering a half-point cut.

A firmer dollar makes gold expensive for holders of other currencies and generally lowers bullion demand.

“It’s sensible to take money off the table ahead of the FOMC meeting if you are long, as there will be better entry points in the market,” said Simon Weeks, head of precious metals trading at Bank of Nova Scotia, referring to the Federal Open Market Committee meeting.

“If the Fed doesn’t cut rates, then there will be a sharp correction in gold,” he added.

Spot gold <XAU=> fell to $783.10/783.90 an ounce by 1531 GMT, down from $788.90/789.70 in New York late on Monday when the metal hit a high of $794.40 — the highest since January 1980 when prices rose to a record high of $850.

Gold also came under pressure because of moves in external markets. The dollar steadied after hitting record lows against the euro in the previous session, while oil fell more than a dollar from its record highs.

Gold generally moves in the opposite direction to the dollar and is often seen as a hedge against inflation.

Despite a correction, traders remained positive on gold.

“Overall sentiment in the market is still bullish, with gold eyeing a test of $800,” said Alexander Zumpfe, metals trader at Germany’s Heraeus. “However, the latest upward move seems a bit overdone and I wouldn’t be surprised if we see a correction after $800 has been tested.”

In other bullion markets, benchmark October 2008 gold futures <0#JAU:> in Tokyo finished down 0.9 percent at 2,911 yen, while the most-active December U.S. gold contract <GCZ7> slipped $4.6 an ounce to $787.90.

Gerard Burg, economist at National Australia Bank, said further declines in U.S. interest rates were expected to lift gold prices as incentives to invest in the metal would rise.

Gold was expected to rise by 8 percent to an average of $740 an ounce in 2008, and much of the gain was likely to be related to the dollar weakness, he wrote in a research note.

In industry news, Harmony Gold <HARJ.J>, the world’s fifth-biggest gold producer, swung to a loss in the quarter to end-June due to falling production and rising costs.

But cash flow from operations was adequate to fund capital expenditure, while output at bigger operations was expected to improve, notwithstanding glitches at smaller shafts, it said.

The market ignored news that Barrick Gold Corp <ABX.TO>, the world’s top gold producer, had halted production at its Bulyanhulu gold mine in Tanzania due to a strike. It fired about 1,000 workers who had walked off the job. [ID:nN30645684]

China’s gold output rose 13.1 percent in the first nine months of the year to 191.5 tonnes, but growth slowed from the first half of the year, the National Development and Reform Commission said. [ID:nPEK3924]

Platinum <XPT=> fell to $1,442/1,446, against $1,454/1,458 an ounce in New York on Monday, when it hit a record high of $1,465. Silver <XAG=> rose to an eight-month high of $14.51 before dipping to $14.25/14.29, against $14.39/14.44. Palladium <XPD=> fell to $367/370 from $371/375 an ounce.

Source: Reuters UK

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