Gold Futures Drift Ahead

Gold was edging slightly higher Wednesday as traders awaited the policy pronouncements from the Federal Reserve later this afternoon.

April-dated bullion contracts were ahead by 80 cents at $659.80 an ounce on the Comex division of the New York Mercantile Exchange.

The exchange-traded funds that hold the metal, iShares Comex Gold Trust (IAU Quote) and streetTracks Gold Shares(GLD Quote), were also rising, up 0.5% and 0.3% respectively.

The Fed is widely expected to leave short-term interest rates unchanged, so it will be the text of statement that observers will scrutinize closely.

"A less hawkish stance on inflation might have a depressing impact on the dollar and as such on the precious-metals price," says Gijsbert Groenewegen, portfolio manager at Gold Arrow Capital Management in New York.

The value of the U.S. currency and that of gold tend to move in opposite directions over time.

One dollar was recently buying 117.895 yen, up from 117.25 yen late Tuesday. The euro was buying $1.33, down from $1.3321 previously.

Underlying the price action on the Comex was the roll-forward of futures positions from near-dated contracts to far-dated ones. Open interest in the April contract recently totaled 15.4 million ounces, vs. 9.1 million ounces for the June contract. From here on, activity in the later-dated instrument will grow as that of the shorted-dated contract falls.