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Gold steadies at $1,000 ahead of Fed, funds sell

Gold steadied around $1,000 an ounce ahead of US Federal Reserve's meeting on interest rates, suggesting investors and speculators were still keen to book profits after pushing up the price to record highs.

Gold hit a low of $994 an ounce before rebounding to $1,001.40/1,002.20 ounce, hardly changed from $1,001.00/1,001.80 in New York. It spiked to an historical high of $1,030.80 an ounce on Monday before profit taking erased most of the gains.

“I think we can say there's disappointed selling today because it could not break the high,” said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

But investors remained bullish on gold and fears of further rises in prices also attracted limited buying from jewellers, said Leung, who pegged support at $990 and resistance $1,020. Gold has gained more than 23% in 2008 on fears of inflation as crude oil hit record, expectations of further rate cuts and deepening US financial concerns after JPMorgan Chase & Co said it would buy cash-strapped Bear Stearns.

Platinum hit a 1-week low, while silver and palladium hovered below their recent highs. COMEX futures rebounded from lows.

The dollar hovered above its lowest level against the yen in nearly 13 years and a record low against the euro, but was prone to more declines on worries about the US financial system.

The Fed is widely expected to cut interest rates by 1 percentage point to 2% at a policy meeting on Tuesday, and investors now see some chance of an even deeper cut.

“I believe the key level remains at $1,025. That's the resistance level. Any level above that might not be sustainable,” said William Kwan, a dealer at Phillip Futures in Singapore.

“But fundamentally, there's a lot of safe-haven buying on anticipation the US dollar will weaken further,” he said.

Gold futures for April delivery on the COMEX division of the New York Mercantile Exchange added $0.4 an ounce to $1003.0 an ounce, off Monday's record of $1,033.90.

Spot platinum fell to $1,952/1,962 an ounce from $1,980/1,990 late in New York on Monday and off a record high of $2,290 an ounce hit on March 4.

Speculators booked profits after main producer South Africa said last week it would boost electricity output to gold mines after a power crisis.

The most active Tokyo platinum futures fell by the daily ¥300 limit to ¥5,991 per gram in a carryover of selling from New York.

Silver edged down to $20.08/20.13 an ounce from $20.35/20.41 an ounce. Spot palladium rose to $466/471 an ounce from $465/470 an ounce. (Reuters)