Gold falls on gaining dollar, FOMC meeting in focus

Gold fell on Tuesday amid stronger dollar. Market players remained cautious ahead of the outcome of Feds two-day meeting, which should provide further information of when the central banks monetary easing program will be tapered.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at $1 324.15 per ounce at 11:27 GMT, down 0.41% on the day. Prices ranged between days high and low of $1 330.35 and $1 318.45 an ounce respectively. The precious metal fell 0.33% on Monday, a third consecutive daily loss, and extended this weeks decline to over 0.6%.

Gold fell on Monday and remained pressured on Tuesday as industry data showed that U.S. Pending Home Sales declined by 0.4% in June, which was less than the expected 1.0% tumble. This was well below May’s 5.8% surge. May’s reading was revised down from 6.7%. The better than expected figure spurred speculation Fed might announce a sooner-than-expected scale back of its monetary easing program.

The dollar index, to which gold trades inversely, rose on Tuesday, pressuring dollar-denominated commodities down. The September contract fell to 81.83 at 11:29 GMT, up 0.05% on the day after hitting a days high of 81.94 during Asian trading and surging to as much as 81.81 in the early European session. Days low stood at 81.77. The U.S. currency gauge rose 0.13% on Monday and has advanced 0.06% so far this week after declining 3.5% in the past three weeks.

Market players are keeping a close eye on this weeks key U.S. economic data and the outcome of Feds meeting on Wednesday to gauge the recovery pace of the economy. U.S. Q2 GDP growth is expected to have contracted to 1.0%, down from the first quarter’s 1.8% advance. Consumer Confidence and S&P/Case-Shiller Composite-20 Home Price Index will be released on Tuesday. On Wednesday, we’ll receive preliminary unemployment data prior to Friday’s Unemployment Rate. The ADP Employment Change is expected to remain flat at 188 000. Also on Wednesday, Personal Consumption Expenditures, Employment Cost Index and Chicago PMI will be released and the FOMC will announce its interest rate decision.

On Thursday, Initial Jobless Claims are expected to have risen by 1 000 in the week ending July 27 and the ISM Manufacturing index should show improvement. On Friday, one of Fed’s main requirements to trim its monetary stimulus, the Unemployment Rate, is expected to have fallen to 7.5% in July, down from 7.6%. Also on Friday are due Personal Income, Personal Spending, Average Hourly Earnings and Factory Orders.

Golds price has largely been tracking shifting expectations of an earlier-than-expected deceleration of Feds monetary easing program. The metal is used mainly as a hedge against inflation, which accelerates when a central bank eases money supply. An exit from a program such as Quantitative Easing would deliver a heavy blow to golds price as its demand will crumble.

Elsewhere on the precious metals market, silver, platinum and palladium are all tracking golds downward direction. Silver for September delivery fell to $19.653 an ounce at 11:26 GMT, down 1.05% on the day. Prices held in range between $19.873 and $19.502. Platinum October futures stood at $1 437.20 an ounce, down 0.38%. Futures ranged between days high and low of $1 446.55 and $1 431.35 an ounce respectively. Palladium for September delivery traded at $739.60 an ounce at 11:26 GMT, marking a 0.68% daily loss. Prices varied between $743.70 and $735.30.