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Gold falls on dollar rise, investors prepare for Fed meeting

By Nakul Iyer

Sep 16 (Reuters) – Gold prices fell slightly on Thursday as rising dollar and U.S. Treasury yields reduced their appeal as investors turned their attention to the Fed meeting. Federal next week waiting for clues about the start of the reduction of stimuli.

* At 0859 GMT, spot gold was down 0.5% to $ 1,784.35 an ounce, while US gold futures were down 0.5% to $ 1,785.10.

* The dollar index gained 0.2%, increasing the cost of buying the bullion for holders of other currencies.

* The Federal Open Market Committee (FOMC) meets September 21-22. A growing number of authorities have expressed support for a reduction in central bank asset purchases this year.

* “There are many members in the FOMC who are in favor of starting the stimulus reduction this year and therefore the outlook for gold is not positive,” said Quantitative Commodity Research analyst Peter Fertig, adding that Recent data showing US inflation slowing last month is unlikely to lead to a postponement of the adjustment.

* Less stimulus from the central bank tends to raise bond yields, which increases the opportunity cost of owning non-interest bearing gold. It also helps boost the dollar, which weighs even more on the bullion.

* But “the waning stimulus will not be favorable to equities and gold could be one of the beneficiaries of the money coming out of the stock market,” said Vincent Tie, sales manager for Singapore trader Silver Bullion.

* “With a Fed expected to start reducing its stimulus in December, we could see higher gold prices in the fourth quarter of 2021.”

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