Gold falls over 1% ahead of Fed meeting, Russian attempts to defuse tension

Gold futures dropped more than 1% in New York Tuesday, settling just below a six-month high reached in the previous session as traders choose caution ahead of tomorrow’s US Federal Reserve's policy review and ongoing tensions in Crimea.

Analysts believe the Fed’s announcement, expected to include a fresh $10-billion cut to its bond-buying stimulus, will have only a limited effect on the gold price.

Bart Jaworski, mining equity analyst at Davy Research, told he believed the Fed tapering would have a much smaller negative effect on gold going forward.

However, he said bullion prices would depend on what happens with Ukraine and he go-forward relations between Russia and the West.

Traders felt some relief Tuesday after Russian president Vladimir Putin said his country “doesn't want any more of Ukraine,” as he signed a bill to annex Ukraine's Crimea territory.

“If the Crimea [annexation] doesn’t lead to a domino effect in Eastern Ukraine, then its likely gold will revert to underlying fundamentals, which are not too supportive in the near-term,” Jaworski said.

Gold falls over 1% ahead of Fed meeting, Russian attempts to defuse tensionHe added the US “economic surprise index” is recovering as weather effects wane, inflation expectations remain subdued and premiums in China and India continue to fall on weaker seasonal demand.

Gold futures for April delivery hit a low of $1,358 an ounce and stood at $1,360.90 by 07:30 GMT, down $12.00.

The contract rallied to $1,392.60 yesterday, its strongest since September 2013.

Cash gold, which often tracks COMEX, fell $6.36 an ounce to $1,359.98, having rallied on Monday to a six-month high at $1,391.76 before profit taking kicked in.

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