Top Stories
Top Stories

PRECIOUS-Gold holds on track for third monthly gain ahead of Fed decision

Swati Verma

* Gold has climbed about 1.5% so far this month

* Fed to announce interest rate decision at 1800 GMT

* U.S. central bank expected to cut rates by 25 bps

* GRAPHIC-2019 asset returns: (Adds fresh comments, updates prices)

July 31 (Reuters) - Gold held steady on Wednesday, on track for a third straight month of gains, as traders awaited a U.S. Federal Reserve statement that is widely expected to signal an interest rate cut.

Spot gold was flat at $1,430.74 per ounce as of 0941 GMT, while U.S. gold futures edged 0.1% higher to $1,431.50 an ounce.

Expectations for an interest rate cut by the U.S. Fed and other major central banks, which would cut the opportunity cost of holding non-yielding gold, have put the metal on track for a 1.5% gain for July.

Fed funds rate futures are now fully pricing in a 25 basis point rate cut on Wednesday, which would be its first since the financial crisis more than a decade ago, and another 25 basis point reduction by September.

"The gold market will focus more on the communication, whether the Fed leaves the door open for more rate cuts later this year citing global growth worries," said Julius Baer analyst Carsten Menke.

"This may lead to some more upside in gold prices."

The Fed's decision is due at 1800 GMT, with Chair Jerome Powell scheduled to hold a press conference soon after.

Backing the Fed's dovish policy tilt, U.S. consumer spending and prices rose only moderately in June, pointing to slower economic growth and benign inflation.

"Should the FOMC surprise either via a 50 bp rate cut or a more dovish tone than expected, the key top-side target for bullion remains at $1,450," industrial and trading services group MKS PAMP said in a note.

"Aside from the FOMC meeting, there remain a number of ongoing risk events to provide price direction to bullion, namely the increasing likelihood of a no-deal Brexit and a lack of progress between the U.S. and China in trade negotiations."

U.S. President Donald Trump warned China against waiting out his presidency before finalising a trade deal, saying if he wins re-election in November 2020, the outcome could be no agreement or a harsher one.

"We have quite a strong link here between the trade talks and the outlook for U.S. monetary policy. The longer the trade tensions drag on... the more we need support from the Fed on the interest rate side," Julius Baer's Menke added.

Among other precious metals, silver slipped 0.7% to $16.46 per ounce, while platinum jumped 0.9% to $873.65 an ounce. Both the metals are on track for a second straight month of gains.

Palladium rose 0.9% to $1,528.65. (Reporting by Swati Verma in Bengaluru; Editing by Jan Harvey)