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1st LD Writethru: Gold up ahead of U.S. Fed statement

Xinhua, October 29, 2015 Adjust font size:

Gold futures on the COMEX division of the New York Mercantile Exchange rose Wednesday ahead of a statement to be released by the U.S. Federal Reserve on the potential timing of a interest rate increase.

The most active gold contract for December delivery added 10.3 U.S. dollars, or 0.88 percent, to settle at 1,176.10 dollars per ounce.

The U.S. Federal Reserve is expected to release a statement on the potential timing of a rate hike increase Wednesday after the market closes. Current expectations are for a delay of the rate hike past the December Federal Open Market Committee meeting (FOMC), as U.S. economic data and world economic stability are still not where economists would like them to be.

According to the CMEGroup FedWatch tool, the current implied chances of a rate hike at Wednesday's meeting is 4.6 percent, while the implied chances of a rate hike during the December FOMC meeting is at 38 percent.

Expectations were originally for a September increase, but due to lower-than-expected U.S. inflation and tension in global markets, expectations have been pushed back to 2016, despite Fed Chairwoman Janet Yellen's statements on Sept. 25 in the University of Massachusetts, indicating the Fed could still raise interest rates before the end of 2015. An increase in the Fed's interest rate drives investors away from gold and towards assets with a return, as the precious metal bears no interest. There has not been an increase in the Fed's interest rate since June 2006, before the beginning of the American financial crisis.

The U.S. Dollar Index was put under pressure by the expectation for a delay in the rate hike past the December FOMC meeting. The Index fell by 0.3 to 96.62 as of 1725 GMT. The index is a measure of the dollar against a basket of major currencies. Gold and the U.S. dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.

Analysts are also waiting and will be watching carefully the economic data due out later this week. The U.S. Gross Domestic Product (GDP) measure, along with weekly jobless claims, is due out on Thursday, and the Personal Income and Outlays report is due out on Friday.

Silver for December delivery gained 43 cents, or 2.71 percent, to close at 16.293 dollars per ounce. Platinum for January delivery rose 23.6 dollars, or 2.38 percent, to close at 1,012.80 dollars per ounce. Endit