Gold to gain ahead of the U.K GDP, FOMC rate decision

With the start of this session, we can see gold is biased to the upside, supported by demand as a hedge against uncertainty ahead of the critical gross domestic product (GDP) figures from the United Kingdom and also ahead of the Federal Open Market Committee (FOMC) rate decision.

Gold advanced 0.13% or $2.10 per ounce so far, trading around $1667.77 per ounce after starting the session at $1665.67 per ounce. The metal set the highest at $1672.32 and the lowest at $1664.57 per ounce.

The shiny metal is still trading within narrow levels since starting the session in Asia, where despite the significant positive bias seen on the metal, the strong U.S. dollar limited the metal's upside move. However, with the high level of uncertainty in the market we see that investors fled to the precious metal in order to protect their wealth against any surprises expected today especially with the heavy load of critical fundamentals and decisions today.

Markets as a start will eye the IFO survey from Germany, where this survey measures the level of confidence in the business sector; therefore, investors will track any improvement in the level of confidence searching for any positive signs in the euro zone largest economy. Better than expected figures could support the sentiment in the market and forced the U.S. dollar to lose some momentum ahead of the awaited rate decision, and in result gold could gain.

The focus will shift after the critical report from Germany to the United Kingdom, which is to release the GDP advanced index for the fourth quarter. The British economy could have contracted by 0.1% from the 0.6% expansion recorded a quarter earlier over quarterly basis, while annually the economy could have expanded by 0.8% from 0.5% in the fourth quarter.

Markets will move in line with the GDP figures, where better than expected indexes could support the sentiment in the market and spread some optimism that could last through the European session, where upbeat figure could relieve markets which expect European nations to contract in the short-term and to slip back into another phase of recession.

At 10:15 GMT Germany will raise 3-billion euros by issuing 30-year bonds, and once again traders will track any changes in the borrowing cost and demand for these bonds, as the performance of the longer-term bonds is more important, because it reflects investors' expectations and confidence in the stronger economy in the euro-area region.

The FOMC rate decision will highlight our session after then, where all eyes will track what the Federal Reserve could provide to support the pace of recovery, noting that the Central Bank is expected to leave rates as they are; however, with the positive signs seen in the U.S. economy we rule out any further easing or another round of quantitative easing, which could be bearish on the shiny metal as the U.S. dollar should gain momentum in case the Bank opted not to provide further easing to the market.

Among other precious metals, silver also added 0.42% or $0.14 per ounce to currently trade around $32.18 per ounce after the opening of $32.04 per ounce. The metal reached a high of $32.32 and a low of $32.06 an ounce.

Platinum shed 0.03% of $0.50 per ounce after starting the session at $1551.50 per ounce, to currently trade around $1551.00 per ounce. The metal recorded a high of $1555.75 and a low of $1543.75 an ounce.

Palladium declined as well to currently trade around $677.75 after it shed 0.37% or $2.50 per ounce. The metal set a high of $683.25 and a low of $677.50 after the opening of $680.25 per ounce.