LONDON: Gold rose on Tuesday as the dollar fell, but remained hemmed into a range ahead of a two-day Federal Reserve policy meeting this week, which will be closely watched for clues on the outlook for US interest rates.

The dollar slid a quarter of a per cent against a currency basket, largely due to a bounce in the yen after traders dialled back expectations of how much new stimulus Japanese authorities will inject into an ailing economy.

Spot gold was up 0.4pc at $1,320.46 an ounce at 1402 GMT, while US gold futures for August delivery were up $1.40 an ounce at $1,320.90.

The Fed is expected to leave policy unchanged at its meeting starting later in the day, but investors are watching for any signs that the US central bank may move back to tightening later this year, a move that would be negative for gold.

Gold is highly sensitive to rising US interest rates, which lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

“The key thing for commodities in the past month is that the macro data in both the United States and China has definitely improved, and that is reflected in the probability of rate hikes,” Oxford Economics’ director of commodity services Daniel Smith said. “We’re looking at a 50pc probability of a rate hike by year-end.”

Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Shares, fell 0.46pc to 958.69 tonnes on Monday. Top consumer China’s net gold imports via main conduit Hong Kong fell 38.5pc in June, data showed on Tuesday.

Palladium was up 1pc at $691.47 an ounce, after earlier touching a nine-month high of $693.30. Silver was up 0.5pc at $19.62 an ounce, while platinum was 1.1pc higher at $1,093.60 an ounce.

Published in Dawn, July 27th, 2016