Gold down ahead of Fed meeting

Gold struggled near one-week lows on Tuesday, ahead of a widely anticipated USA rate hike by the Federal Reserve.

United States benchmark West Texas Intermediate for delivery in January rose $1.04 to $37.35, while Brent crude for February was 57 cents higher at $38.73.

Spot gold was at $1,062.45 an ounce at 1503 GMT, little changed from $1,062.60 late on Monday.

COMEX Gold prices followed its negative trend for whole week and broke the important support level of $1066 per ounce and tested the level of $1062 per ounce downside due to weakness in the USA dollar coupled with the expectation that the Fed will raise interest rates in its December 15-16 meeting. Silver prices dropped to a six-year low. Traders are pricing in 76 percent odds that the Fed will raise rates in their final meeting of 2015, ending a seven-year era of near-zero borrowing costs.

There has not been an increase in the Fed’s interest rate since June 2006, before the beginning of the U.S. financial crisis. Gold was not getting much support from the physical markets either.

Among other precious metals, silver was up 0.3 percent at $13.76 an ounce, steadying after a six-day losing streak.

Robustness in the dollar and weakness in oil prices also kept gold prices from moving higher.

Platinum was up 1.2 percent at $858.90 an ounce, while palladium was up 1.9 percent at $554.90 an ounce.

Many market watchers have thrown in the towel on calling gold a safe-haven asset, given the extreme bearish sentiment in the precious metals at present.

“Gold is trading between conflicting price pressures, with short-term downside pressure apparently growing, although the potential for a further upside challenge remains”, Tom Moore, an analyst at FastMarkets, said. Prices slumped to a daily low of $13.75 on Friday, a level not seen since August 2009. Meanwhile, the SPDR Gold Trust (ETF) (NYSEARCA:GLD) is down by 10 basis points (bps) at $101.69 in early minutes of trade on the New York Stock Exchange (NYSE).

Gold prices could go up immediately following the rate hike announcement due to the recent sharp declines, but they will eventually drift lower to $1,000, he said.