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Gold down ahead of FOMC announcement

Xinhua, February 2, 2017 Adjust font size:

Gold futures on the COMEX division of the New York Mercantile Exchange fell on Wednesday ahead of the Federal Open Market Committee (FOMC) announcement due after the market's close.

The most active gold contract for March delivery fell 3.1 U.S. dollars, or 0.26 percent, to settle at 1,208.3 dollars per ounce.

The primary focus of the market on Wednesday was preparing for the February FOMC meeting announcement. Traders balanced their positions to avoid risk, putting pressure on the precious metal.

Investors did not believe that the Fed would raise rates during the Wednesday FOMC meeting. They believe the Fed may raise rates from 0.75 to 1.00 during the March FOMC meeting at the earliest. According to the CME' s Group' s Fedwatch tool, the current implied probability of a hike from 0.50 to at least 0.75 is at 25 percent at the March meeting and 43 percent for the May meeting.

Gold was put under pressure as a report released by the U.S.-based Institute for Supply Management (ISM) on Wednesday showed its manufacturing index increasing to 56.0 during the month of January.

Analysts note that the factory sector is showing the most strength since November 2014, before the oil price collapse later in that year, with strong employment measures.

In addition to the strong ISM report, the U.S. Dollar Index rose by 0.18 percent to 99.74 as of 18:00 GMT. The index is a measure of the dollar against a basket of major currencies.

Gold and the 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.

The precious metal was put under additional pressure as the U.S. Dow Jones Industrial Average rose by 21.61 points, or 0.11 percent as of 18:30 GMT. Analysts note that when equities post losses, the precious metal usually goes up, as investors are looking for a safe haven, while the opposite is true when U.S. equities post gains.

Silver for March delivery fell 9.3 cents, or 0.53 percent, to close at 17.45 dollars per ounce. Platinum for April delivery added 3.3 dollars, or 0.33 percent, to close at 999.80 dollars per ounce. Endit