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Gold holds near $1 200 as dollar retreats

Melbourne - Gold held the biggest gain in almost three months to trade near $1 200 an ounce before Federal Reserve policy makers begin a meeting on interest rates amid a mixed outlook for the US economy.

Bullion for immediate delivery traded at $1 201.14 at 08:48 from $1 202.15 on Monday, when prices rallied 2%, the biggest gain since January 30, according to Bloomberg generic pricing. Gold in Shanghai advanced.

Gold climbed on Monday as speculation the central bank may wait longer before raising rates helped to send the dollar to a seven-week low.

Higher rates spur investors to favour assets with better yield prospects, such as equities.

After reports last week showed orders for business equipment fell and purchases of new homes slumped more than forecast, investors will scrutinize Wednesday’s report on first-quarter economic growth.

“The two-day FOMC meeting begins tonight in the US and before the crucial monetary statement is released, gold is unlikely to move wildly,” Howie Lee, an investment analyst at Phillip Futures Pte in Singapore, wrote in a note. “We don’t see gold hugely deviating away from $1 200.”

US GDP rose 1% in the three months through March 31, according to the median estimate of analysts surveyed by Bloomberg before the data on Wednesday. The economy is set to grow by 2.8% this year, the most since 2005, according to economists surveyed by Bloomberg.

Raising rates

While the Fed has ruled out raising rates when it meets this week, policy makers have left the door open for June. The Federal Open Market Committee will release a statement on Wednesday in Washington after concluding the two-day meeting.

Gold for June delivery declined 0.2% to $1 200.40 an ounce on the Comex after jumping 2.4% on Monday.

Holdings in exchange-traded products backed by the metal declined 0.2% on Monday after expanding for six straight days, according to data compiled by Bloomberg.

Bullion of 99.99% purity rose 1.5% to $1 204.44 an ounce on the Shanghai Gold Exchange after dropping to 235.01 yuan on Monday, the lowest since March 23.

Silver for immediate delivery fell 0.2% to $16.3683 an ounce after prices surged 4.3% on Monday, the most since January 16.

Platinum retreated 0.5% to $1 142.25 an ounce, while palladium dropped 0.2% to $778.25 an ounce.

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