Gold prices steadied Tuesday as financial markets anticipated the outcome of the Federal Reserve`s two-day policy meeting.
The Federal Open Market Committee (FOMC) decision, expected to be announced Wednesday afternoon, is expected to leave interest rates unchanged at a record-low 0.25%, but investors remained cautious ahead of the FOMC decision, leaving gold at crossroads of these two scenarios:
1- FOMC will end stimulus programs supporting the U.S. economy, reaffirming the previous statements the economy is on the right path towards recovery, thus the Fed would start raising interest rates gradually in the mid of 2015.
This scenario will likely push gold prices to the downside amid improved risk appetite as traders would start shifting their money towards higher-yielding assets, such as equities, instead of the safe-haven metal.
2- The Fed would postpone terminating stimulus programs, fueling uncertainty about the future of the U.S. economy, therefore, delaying any possible increase in interest rates. This possible guidance would benefit the metal`s safe-haven appeal.
The Fed`s policy announcement will be the main focus for the next two days, leaving little room for the upcoming economic data to influence the price ahead of the FOMC decision.