Gold Shakes Off Expectations Of Fed Taper

Gold edged higher in Europe Wednesday, reversing last session`s losses ahead of a key U.S. Federal Reserve decision later in the day and amid wide speculation the central bank may refrain from a reduction in monetary stimulus.

Ahead of the decision, spot gold edged up 0.42 percent or 5.15 points to trade at $ 1,235.80 an ounce, after dropping 0.8 percent in the previous session.

The precious metal returned to positive territory Wednesday, as the Federal Reserve officials conclude a two-day meeting today, to decide whether they will keep the bank`s $85 billion in monthly bond-buying program or will start curbing it.

Markets have been extremely sensitive to comments on the Fed`s outlook for the stimulus with recent improvement in economic data, most notably labor market adding to expectations in favor of seeing a stimulus cut, while some analysts predict that any slash in the monthly bond purchases would not take place before next year.

Gold has lost about 26 percent in 2013, amid growing concerns that an improving U.S. economy could prompt policymakers to scale back its ultra-loose Asset purchases. The $85 billion in monthly bond purchases have been a major supporter of global commodities such as gold while it weakens the dollar.

Elsewhere in metals trading:

- Spot silver gained as much as 0.71% to $ 20.000 an ounce.

- Platinum advanced 0.57% to $ 1,356.80 an ounce.

- Palladium climbed 0.87% to $ 706.60 an ounce.

Physical Demand

Meanwhile, physical demand has been weak amid the lack of investor enthusiasm for the precious metal as they wait for prices to drop further after the Fed meeting.

Reports showed demand from China, the world’s second largest gold consumer, has fallen and trading volumes on the Shanghai Gold Exchange were low.

SPDR Gold Trust, the world`s largest gold-backed exchange-traded fund, said its holdings fell 2.08 tones to 816.82 tons on in the previous session, a fresh lows since January 2009.