Gold fluctuated within a narrow range in the afternoon as investors were waiting for the outcome of the Federal Reserve’s policy meeting.
While it is all but certain that the Fed will unveil a new round of quantitative easing, it is unclear what the size of the fresh stimulus package will be. An asset buying programme of US$500 billion seems to have already been priced into the markets.
A larger stimulus programme would likely weaken the US dollar, increasing gold’s appeal as an alternative investment to the American currency and an inflation hedge.
Goldman Sachs (NYSE:GS) analysts said that the Fed could be forced to inject as much as US$2 trillion into the economy, while a report in the Wall Street Journal suggested that the Fed may opt for a smaller stimulus that would be limited to a few hundred billion dollars stretched over a few months.
Gold last traded at US$1,355/oz, while silver and platinum retreated to US$24.81/oz and US$1,707/oz respectively.
Silver miner Fresnillo (LON:FRES) led the sector in the FTSE 100 with a 2.5% advance. Platinum miner Lonmin (LON:LMI) rose marginally, as did African Barrick Gold (LON:ABG), while fellow gold producer Randgold Resources (LON:RRS) posted a small loss.
In the FTSE 250, gold Petropavlovsk (LON:POG) dropped 3.5% after cutting its production guidance for the full year, while Aquarius Platinum (LON:AQP) declined marginally. Silver producer Hochschild Mining (LON:HOC) advanced 1.4%.
Gold and silver explorer Patagonia Gold (LON:PGD) shot up 22% after it reported the latest batch of drill results which revealed “exceptionally high grade” gold and silver from its COSE project in Argentina. Other top risers among the small caps included Latin America focused gold producer and explorer Orosur Mining (LON:OMI) and Fiji operating gold miner Vatukoula Gold Mines (LON:VGM), which added more than 7%.