Gold Futures Drop; Dollar Ticks Down

Gold prices were slipping Wednesday and the dollar was weaker as traders waited for the release of the Federal Open Market Committee policy statement.

Benchmark bullion futures were losing $6 at $885.60 an ounce in recent action on the Comex division of the New York Mercantile Exchange.

Meanwhile, one euro was buying $1.5607, up from $1.5575 Tuesday. The British pound was selling for $1.9713 vs. $1.9693 a day earlier, while the greenback was trading for 107.9 Japanese yen, virtually unchanged from the prior session.

The Federal Reserve is widely expected to leave the cost of borrowing unchanged, but increasing worries about inflation point to future interest rate hikes. It is those expectations that helped support the dollar against the euro during the trading session.

"Fed funds futures are pricing probabilities of a tightening in 2009 and even late 2008," writes Ashraf Laidi, chief foreign-exchange strategist at CMC Markets in New York, in a recent research report.

However, Laidi expects the Fed statement to push back such rate moves further than some others expect as policy makers worry about weakening labor markets and try to avoid adding to the recent declines in the stock market.

The CurrencyShares Euro Trust(FXE Quote - Cramer on FXE - Stock Picks) was ahead 0.3%. The CurrencyShares British Pound Sterling(FXB Quote - Cramer on FXB - Stock Picks) was steady. The CurrencyShares Japanese Yen Trust(FXY Quote - Cramer on FXY - Stock Picks) was down less than 0.1% in recent action.

The SPDR Gold Trust(GLD Quote - Cramer on GLD - Stock Picks), was losing 0.4%.

In the precious metals patch, Newmont Mining(NEM Quote - Cramer on NEM - Stock Picks) was sliding 0.8%.