London 01/08/2012 - Gold was directionless in a narrow range on Wednesday morning and is likely to remain that way ahead of the Federal Open Market Committee (FOMC) statement due out at 19:15 BST.
Gold was last at $1,614.70/1,615.20 per ounce, up 30 cents on the close and once again confined to a narrow range of less than $10.
The rest of the precious metals were similarly subdued - silver nudged down two cents to $27.93/27.99 per ounce while platinum ticked $1.30 higher to $1,411.00/1,416.50 and palladium gained 92 cents to $587.90/591.80.
"As a whole, we expect the metals to be held to tight ranges today as players await the FOMC meeting and the accompanying statement, with [most] looking for the Fed's view on the US economy and its need for further stimulus," FastMarkets analyst James Moore said.
The FOMC started its two-day meeting in Washington today, with its statement due out on Wednesday.
Though there has been some expectation that the Fed may use this opportunity to jumpstart the US economy with an injection of cash, most analysts agree that such a step, if taken, will not occur until later. The statement will thus be scrutinised for hints of future action.
Further accommodative measures from the US central bank would be unequivocally supportive of gold because extra liquidity tends to debase the dollar and create future inflationary risks.
"Broadly speaking, we expect the suggestion or a timescale for QE/stimulus to be positive for metals although the sector remains vulnerable to a deeper correction should markets be disappointed," Moore added.
But HSBC believes the downside in such a scenario would be limited. "If the Fed decides to forgo easing, we expect any subsequent gold price decline would be relatively short-lived, as the bullion market may anticipate additional easing at the FOMC’s September meeting. Thus, we believe that the recent gold bull move may be blunted but not reversed," analyst James Steel said.
The FOMC meeting will be followed by meetings of the European Central Bank and Bank of England on Thursday, with hopes high for more stimulus following a promise by ECB president Mario Draghi to keep the euro alive.
Last week, Draghi told a meeting in London that the ECB stood ready to do whatever it takes to save the euro, a sign interpreted by many that the bank is preparing to re-enter the bond markets.
But earlier today, Bundesbank president Jens Weidmann warned Draghi not to overstep his mandate.
On the physical markets, gold remains under pressure in major consumer India, where below-average monsoon rains have dampened buyer incomes and a falling rupee has ramped up local prices.
Gold was last at 89,622/89,672 rupees per ounce, down 216 rupees from yesterday's close but not far below the all-time high of 91,507.32 rupees set on June 19.
(Editing by Mark Shaw)