Gold flat as traders await Fed decision, Gold could end year between $1,750-$1,800

Dec 15 (Reuters) – Gold prices were flat on Wednesday after a sharp drop in the previous session, as investors waited to see if the U.S. central bank speeds up its tapering at the end of a two-day meeting later in the day.

Spot gold was little changed at $1,769.92 per ounce by 0354 GMT after a near 1% drop on Tuesday, while U.S. gold futures fell 0.1% to $1,769.90 per ounce.

“It looks like there’s some pre-FOMC (Federal Open Market Committee) positioning flowing towards a defensive against rates,” said Stephen Innes, managing partner at SPI Asset Management.

“If you look at stocks, if you look at gold, everything is sort of rotating out of anything that could have a negative connotation if the U.S. rates start to rise again.”

Traders are watching the U.S. Federal Reserve to see whether it accelerates tapering of its bond buying programme and brings forward its projections for interest rate rises.

Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of holding bullion, which bears no interest.

“Even in a hawkish pivot, gold could end the year somewhere between $1,750 and $1,800 if the Fed moves to three dots. If it’s two dots, I think it becomes supportive for gold, but I don’t think there’s an outright rallying cry for bullion investors right now,” Innes said.

The European Central Bank, the Bank of England and the Bank of Japan are also scheduled to meet this week.

Asian markets were flat, while the dollar held firm.

Silver fell 0.2% to $21.88 per ounce and platinum slipped 0.2% to $917.98, while palladium rose 0.7% to $1,633.14.

(Reporting by Seher Dareen in Bengaluru; Editing by Rashmi Aich)