Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

Austin— Gold held nearly flat, inching down 50 cents to close under $1,203, as pressure from a sharp rise in the dollar was offset by demand for safe havens before tomorrow's Fed decision and elections in Holland.

The Federal Reserve's two-day meeting on monetary policy commenced today with the nearly universal expectation that the central bank will raise interest rates by a quarter-point. Despite real GDP growth of just 1.2% in the first quarter, robust inflation and employment data have prompted a series of prominent Fed member to signal a rate hike is coming at this meeting. CME Fedwatch places the odds at 93%, based on trading in Fed fund futures.

The dollar extended its gains ahead of the meeting, adding 0.4% against major rivals. The UK pound dropped to its lowest level against the buck since January as the path was cleared by lawmakers to begin the formal process of leaving the European Union.

Rising interest rates typically support the dollar by attracting foreign exchange investment seeking higher yields, in turn pressuring gold and other commodities denominated in dollars for international trade by making them more expensive for users of other currencies.

This pressure was offset for the second straight day by safe-haven inflows as investors brace for tomorrow's general election in the Netherlands. If the far-right Party for Freedom makes a strong showing, it could augur well for success by the anti-EU candidates in France's elections in April and May, which could put the union and euro at risk.

The other precious metals also declined, with silver falling 0.3% while platinum and palladium dropped 0.2% and 1.7%, respectively.

At the Comex close: April gold inched down 50 cents to $1,202.60; May silver dropped 5 cents to $16.92; April platinum dipped $2.30 to $938.90; and June palladium lost $12.75 to $741.70 an ounce.