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Gold is trading at $1263, down 0.95% on the day as traders sit on their hands ahead of the announcement from the US central bank later on. It is not uncommon for investors to play the wait-and-see game in the hour before a major announcement.
We have already been given some idea of what the Fed are thinking; on Tuesday William Dudley stated that he is ‘getting more hopeful’ of a US economic recovery, and last night Charles Evans suggested the banks should increase lending. Traders have interpreted these statements as a sign the US economy is strengthening, but there is still a way to go before the Fed reduces its stimulus package.
Gold plunged through the $1300 at the start of the month due to a strong non-farm payrolls figure, but investors overlooked the fact that unemployment ticked up to 7.3%; keep in mind the Fed are using the unemployment rate to gauge the US economy. If the statement from the Fed reiterates its commitment to the $85 billion-per-month bond buying scheme, we could see gold trade higher.