Gold Futures Drift Ahead

April-dated bullion contracts are up 80 cents at $659.80 an ounce.
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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) - Get Report

and

streetTracks Gold Shares

(GLD) - Get Report

, 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.

As for geopolitics, a firming factor for bullion prices was news that talks aimed at disarming a nuclear North Korea have stalled. Demand for gold tends to rise in times of geopolitical uncertainty, but this time it may turn out to have only transitory effects.

"This is classic negotiating behavior by Pyongyang," says Joe Brusuelas, chief U.S. economist at IDEAglobal in New York. "What it means is that North Korea is close to making a deal and

is now trying to extract the maximum amount of value at the last possible moment."

In the precious-metals patch,

Golden Star Resources

(GSS) - Get Report

was popping 5.6% on news that the Littleton, Colo., miner started production at its Pampe gold project in Ghana.

Mining stalwarts

Barrick Gold

(ABX)

and

Newmont Mining

(NEM) - Get Report

were ahead by about 0.5% in recent action.

In base metals, copper contracts were slightly up at $3.04 a pound on the Comex.

Metal refiners produced 1.5 million tons of copper in January, up almost 6% from a year ago, according to new data from the U.K.-based World Bureau of Metal Statistics. The organization estimates there was a negligible 6,000-ton metal surplus during the month, leaving the market roughly in balance.

Elsewhere, Prudential dinged shares of Canadian aluminum smelter

Alcan

(AL) - Get Report

to an underweight rating from an overweight and slashed the stock price target to $48 a share from $60.

The broker also ratcheted down its rating on

Alcoa

(AA) - Get Report

, Alcan's U.S. counterpart, to a neutral rating from overweight and trimmed its target stock price to $38 from $41.

Shares of Alcan were dipping 0.5%, while Alcoa was off 1.7% in recent activity.