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Gold slips 1% as dollar firms ahead of Fed meeting

London: Gold fell one per cent on Monday, after posting its biggest weekly gain in two months, as the dollar firmed before a Federal Reserve meeting that could provide clues on the timing of a possible interest rate rise by the US central bank.

The Fed’s meeting on Tuesday and Wednesday follows data pointing to a strengthening economy, which could sharpen the case for the central bank to take a more hawkish stance. A sooner-than-expected rise in interest rates could boost the dollar and hurt non-interest-bearing bullion.

Spot gold fell to a session low of $1,206.51 an ounce, and was down one per cent at $1,209.41 by 1440GMT.

The metal climbed 2.6 per cent last week, its largest such increase since October, but investors were cashing in after gold failed to breach key resistance convincingly at $1,235. US gold futures for February delivery also slipped one per cent to $1,210.20 an ounce.

“A lot of the price strength that we saw last week was about the dollar, which saw some shine come off,” broker Sharps Pixley CEO Ross Norman said.

The dollar rose 0.2 per cent against a basket of currencies , boosted by positive US economic data.

The Fed is expected to release a statement at the end of its meeting, its last for the year, followed by a news conference by the central bank’s chief, Janet Yellen. Many investors believe the Fed may change its promise to keep interest rates near zero for a “considerable time”.

“The question now is whether the Fed will drop the considerable-time language and become more dependent on the economic data, which could lead to a rate increase in June,” Natixis analyst Bernard Dahdah said.

Holdings of the world’s largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, posted their biggest weekly rise in five months last week, at 4.8 tonnes. That also marks the first time the trust’s holdings have risen for two consecutive weeks since mid-July.