Gold prices steady Ahead of Fed Meeting

Fed chair Janet Yellen struck a surprisingly dovish tone at recent Congressional testimony- Source Wikimedia Commons

The central bank has a 2 per cent target for this measure of inflation.

While the Fed said it expected to start shrinking its massive holdings of bonds "relatively soon", the central bank also noted weakness in US inflation more explicitly than before.

The Federal Reserve held interest rates steady Wednesday and said it plans to begin selling off $4.5 trillion in securities purchased during the financial crisis "relatively soon".

"We think the Fed has laid out its policy plans quite clearly and it is unlikely to deviate from them unless there is a very dramatic change to inflation and employment trends", said Rick Rieder, BlackRock's chief investment officer of global fixed income.

As broadly expected by investors, the Fed maintained its benchmark lending rate and said it was continuing the slow path of monetary tightening.

Gold touched its highest in six weeks on Thursday, lifted by short-covering and a weak dollar after investors bet U.S. interest rates could be kept low for longer. The euro fell to $1.1633 from $1.1652, and the British pound dipped to $1.3036 from $1.3037.

The FOMC repeated it was "monitoring inflation developments closely" - barely changing its statement issued in June, when the central bank raised interest rates by a quarter point to the current range of 1.0 to 1.25 percent.

New orders for key USA -made capital goods unexpectedly fell in June, but a fifth straight monthly increase in shipments suggested that business spending on equipment supported economic growth in the second quarter. With the U.S. interest rates remaining unchanged foreign institutional investors are likely to invest in emerging markets, wherein Indian equities may attract a healthy chunk of this fresh inflow of funds.

CURRENCIES: The dollar edged down to 111.88 Japanese yen from 111.89 yen late Tuesday.

"Over the past two weeks the U.S. dollar has been under pressure and the lack of clear guidance by the Fed appears to have provided an additional excuse to sell the greenback", said Mr Catril. The index touched a 1-year low of 93.86 on Friday and has depreciated by close to 8 percent this year.

The Fed's accompanying statement acknowledged inflation was "running below 2%" instead of "running somewhat below 2%", a downbeat assessment compared to the June statement. Gold hit a six-week high and was last trading at US$1,261.80, while copper reached US$6,400 a tonne, territory not trodden since May 2015.

Brent crude was last down 0.59% at $50.67 per barrel, and West Texas Intermediate lost 0.7% to $48.41.

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