Gold remains unchanged ahead of Fed meeting on direction of rate hikes

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American Eagle and South African Krugerrand gold bars are offered for sale at the Chicago Coin Company May 11, 2006 in Chicago, Illinois.

Scott Olson | Getty Images

Gold was little changed on Monday as investors awaited the Federal Reserve meeting for confirmation of its rate hike path, while concerns over inflation and tensions between Russia and Ukraine kept the bullion’s safe haven appeal intact.

Spot gold was flat at $1,833.36 an ounce by 0034 GMT. US gold futures were up 0.2% to $1,834.70.

The Fed is set to tighten much faster than anticipated a month ago to curb persistently high inflation, which economists polled by Reuters now see as the biggest threat to the US economy in the coming year.

The US Federal Reserve’s Federal Open Market Committee is scheduled to meet on January 25-26.

Gold is generally viewed as a hedge against inflation, but is very sensitive to rising US interest rates, increasing the opportunity cost of holding interest-free gold.

Benchmark yields for 10-year US Treasuries fell on Friday, lowering the opportunity cost of holding interest-free gold bullion.

Russia will face severe economic sanctions if it installs a puppet regime in Ukraine, a senior British minister said on Sunday after Britain accused the Kremlin of trying to install a pro-Russian leader there.

Gold sold at a discount in India last week as a surge in domestic prices dampened demand and jewelers eyed the country’s full-year budget, while the approaching Lunar New Year boosted demand in other key Asian hubs.

Spot silver was trading flat at $24.23 an ounce. Palladium fell 0.3% to $2,101.56 and platinum rose 0.2% to $1,031.43.

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