Investing.com -- Gold rose sharply amid heavy profit taking, ahead of the Federal Reserve's highly anticipated monetary policy decision on Wednesday afternoon when the U.S. central bank is widely expected to raise short-term interest rates for the first time in nearly a decade.
On the Comex division of the New York Mercantile Exchange, gold for February delivery wavered between $1,059.80 and $1,077.80 an ounce before settling at $1,077.30, up $15.80 or 1.49% on the session. Since slipping below $1,050 an ounce earlier this month, gold has risen moderately by approximately 3%. More broadly, gold futures are down by roughly 8% since the start of 2015, down considerably from their yearly high of $1,303.50 in early-January.
Gold likely gained support at $1,046.20, the low from December 3 and was met with resistance at $1,138.70, the high from Nov. 2.
Investors braced for a likely rate hike from the Federal Open Market Committee upon the completion of its two-day meeting on Wednesday afternoon. Nearly a decade has passed since the Fed last raised its benchmark Federal Funds Rate, the rate used by institutions on overnight, interbank deposits at the Federal Reserve Bank of New York. The rate has remained at a zero-bound range between zero and 0.25% since December, 2008, shortly after the start of the Financial Crisis. On Wednesday, the CME Group's (O:CME) Fed Watch placed the probability of a rate hike at 79%, down slightly from a probability of 83% on Monday afternoon.
A rate-hike is widely viewed as bearish for gold, which is not attached to interest rates or dividends and struggles to compete with high-yield bearing assets.
Throughout the year, major fluctuations in gold have been linked with hints from the Fed on the timing of a rate hike. On March 19, gold surged 1.54%, a day after dovish comments from Fed chair Janet Yellen at the FOMC's March monetary policy meeting. While the FOMC removed patience language from its monetary policy statement at the time, Yellen added at a press conference that a rate hike was not imminent at the FOMC's next meeting in April. Then, on June 18, the precious metal soared more than 2.1% after the FOMC declined to issue explicit wording on the timing of lift-off, delaying a hike even further. By the same token, gold plummeted by more than 1.5% after a robust U.S. jobs report for October paved the way for the Fed to raise rates.
Elsewhere, the number of housing permits in November surged 11% to 1.289 million, significantly above consensus estimates of 1.141 million. Housing starts, meanwhile, rose by 960,000 or 2.2% to 1.173 million from an upwardly revised 1.062 million in October. U.S. industrial production, though, fell 0.6% in November, its largest drop in three and a half years, amid continued declines in mining activity.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, was relatively flat in U.S. afternoon trading at 98.25, up 0.04% on the day. Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for March delivery soared by 0.435 or 3.16% to $14.205 an ounce.
Copper for March delivery gained 0.016 or 0.76% to $2.072 a pound.