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(Bloomberg) — Gold held the biggest gain in almost three months to trade near $1,200 an ounce before Federal Reserve policy makers begin a two-day meeting on interest rates as data showed a mixed outlook for the U.S. economy.
Bullion for immediate delivery traded at $1,199.75 at 9:06 a.m. in Singapore from $1,202.15 on Monday, when prices rallied 2 percent, the biggest gain since Jan. 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 favor 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.

“There are several potential important benchmarking events ahead for the U.S. dollar with the first reading on first quarter GDP and the FOMC meeting,” James Steel, an analyst at HSBC Securities (USA) Inc., wrote in a note. “A U.S. dollar rally from a more hawkish FOMC statement would be negative for gold, while a U.S. dollar decline from a more dovish FOMC statement would be positive.”

U.S. GDP rose 1 percent 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 percent 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 0.4 percent to $1,199 an ounce on the Comex after jumping 2.4 percent on Monday. Bullion of 99.99 percent purity rose 1.4 percent to 240 yuan a gram ($1,200.41 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 0.3 percent to $16.3494 an ounce after prices surged 4.3 percent on Monday, the most since Jan. 16. Platinum retreated 0.5 percent to $1,142.50 an ounce, while palladium dropped 0.3 percent to $777.20 an ounce.

To contact the reporter on this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net Jake Lloyd-Smith, Ovais Subhani