LONDON, Aug 8: Gold was trapped in a $5 range on Tuesday ahead of the US Federal Open Market Committee meeting on interest rates, which may offer fresh leads for bullion traders. Investors might be tempted to sell the dollar and buy gold with the Fed widely expected to hold rates steady at 5.25 per cent after more than two years of credit tightening, but surprises were possible, dealers said.
Although market consensus pointed to a pause in the tightening cycle...the Federal Reserve could shock the market, thereby boosting the US dollar while putting pressure on the yellow metal, Standard Bank said in a report.
Also important will be the Federal Reserve's post-meeting statement that would provide clues to how the interest rate campaign will unfold in the future and whether there will be room for further hikes, it said.
Lower interest rates tend to hurt the dollar and often lift gold's allure as an alternative investment.
Spot gold hit a high of $649.75 an ounce before dipping to $645.25/646.25 by 0931 GMT, down from $647.60/648.35 an ounce late in New York on Monday.
The dollar fell towards last week's two-month lows against major currencies ahead of the meeting of the Fed, which will announce its decision at around 1815 GMT.
James Moore, precious metals analyst at TheBullionDesk.com, said the metal was seen trading in a range on Tuesday as dealers were expected to stay on the sidelines.
But market sentiment remained bullish because of the Middle East conflict and high oil prices, he said.
Basically, gold was in a tight band, and the market would need something fresh to break through the range, he said.
In Japan, key June Tokyo Commodity Exchange gold futures closed 9 yen per gram lower at 2,415 yen ($20.98) a gram after moving in a range of 2,412 to 2,426 yen. Other contracts closed down two to seven yen.
In other metals, platinum declined to $1,238/1,243 an ounce from $1,250/1,255 late in New York, while palladium fell to $320/325 an ounce from $323/328. Silver was at $12.19/12.29 an ounce, down from $12.24/12.29.—Reuters