Daily Gold Update

Source: Marketwatch

San Francisco— Gold futures touched their highest level in more than three weeks Tuesday morning then eased back from the day's high while silver prices edged lower ahead of the outcome of a Federal Reserve policymaking meeting.

Gold for June delivery was last trading down 60 cents at $572 an ounce on the New York Mercantile Exchange after climbing as high as $575 earlier, a level not seen since March 3. April gold traded at $566.50, down 90 cents.

May silver was down 2.5 cent at $10.87 an ounce.

On Monday, gold closed at a three-week high, while silver struck a fresh 22-year high on continued excitement about the expected launch of a Barclays exchange-traded fund that would sharply increase physical demand for the metal.

Some weakness in the U.S. was another support, as the market geared up for a Fed announcement on interest rates at 2.15 p.m. Eastern today.

"The U.S. dollar is putting in a massive top and is primed and ready for a big fall," said Peter Grandich, editor of the Grandich Letter. "Such a move can only add to the many bullish factors already underpinning gold."

Meanwhile, the U.S. central bank is widely expected to raise interest rates by a quarter point, its 15th straight hike, bringing rates to 4.75%. But investors will focus most closely on the statement accompanying the decision, the first to be made under the stewardship of new chairman Ben Bernanke.

The decision is expected at 2:15 p.m. Eastern time, after trading in the metals-futures market ends.

"The outcome of the meeting and the ensuing statement will have a significant influence on the financial markets, including gold and other commodities, as analysts and investors alike are desperately searching for signs of a pause or end to the current interest rate policy campaign, of which a break would be highly supportive," said analysts at Standard Bank.

Any hint that the rate cycle is approaching an end would hurt the dollar, which in turn would support gold, analysts said. The dollar was higher against the yen but lower against the euro in early trade. See currencies story.

Jon Nadler, an investment products analyst at bullion dealers Kitco.com, sees the Fed decision "as a moot point."

If the Fed raises the interest rate, "the market has not only digested that reality a priori, but it could be seen as a sign that they are really trying to attract and retain foreign investment (from our creditor nation friends)," he said.

And if the Fed stops or signals that the "cycle" of interest-rate hikes are over "then of course traders will fell more encouraged to take gold back over the $572 level once more and make a run for the $600 mark once and for all," he said.

"So, this one is looking more like a win-win for gold quite possibly," said Nadler.

Elsewhere in the metals market Tuesday, April platinum tacked on $5.50 to $1,074 an ounce while June palladium fell 80 cents to $342 an ounce. May copper added 0.2 cent to trade at $2.432 a pound.

On the supply side, inventories of copper fell 630 short tons to 27,474 short tons as of late Monday, according to Nymex.

Gold stocks were unchanged at 7.53 million troy ounces, while silver supplies rose 276,197 troy ounces to 125.3 million troy ounces.