Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

Austin— Gold edged higher by 0.1% to close at $1,257 as the dollar slipped ahead of the Fed's two-day meeting on monetary policy.

While the May meeting of the FOMC, which starts tomorrow, is unlikely to bring changes in policy, the markets will watch closely for signals about future rate hikes in the policy statement to be released on Wednesday afternoon.

A slew of weak economic data has raised the odds that the Fed will soften its stance on raising rates at least twice more this year. The economy grew at a sluggish 0.7% during the first quarter for its slowest growth in three years. In addition, job growth in March was extremely low while housing starts, consumer spending, factory output, and several regional Fed surveys all came in surprisingly anemic in recent weeks. Consumer inflation also fell, with the PCE dropping to 1.8% over 12 months in March after hitting a five-year high in February.

The dollar dropped 0.1% against a basket of rivals despite rising to a six-week high against the yen as traders hedged against the possibility of a dovish Fed statement. Rising rates typically strengthen the dollar by increasing foreign exchange investment seeking higher yield, and a stronger dollar weighs on gold by making it more expensive overseas.

The other precious metals were also lower, with silver and palladium dipping 0.1% while platinum lost 0.7%.

At the Comex close: June gold added $1.50 to $1,257; July silver dipped a cent to $16.83; July platinum fell $6.53 to $926; and June palladium lost 81 cents to $813.60 an ounce.