Gold falls ahead of FOMC statement

By Andrea Tse, TheStreet

Updated at 2:10 p.m. ET

Gold prices softened ahead of a key Federal Open Market Committee statement that could provide investors with more direction on where the economy is headed.

The policymakers are expected to leave the key Fed funds target rate untouched at zero to 0.25%. However, investors and analysts are still waiting to hear more about an expected discussion of more quantitative easing measures.

Earlier today, another key piece of economic data -- housing starts -- was announced. The Department of Commerce said housing starts increased 10.5% in August to 598,000 from 541,000 in July, which was better than the 550,000 starts economists were expecting, according to Briefing.com.

Gold for December delivery settled $6.50 lower to $1,274.30 an ounce at the Comex division of the New York Mercantile Exchange. Gold today traded as high as $1,283.90 and as low as $1273.50. The U.S. dollar index was down 0.4% to $81.04, while the euro was rising 0.5% to 1.31 against the dollar. The spot gold price was losing more than $5, according to Kitco's gold index.

Also to be discussed at the FOMC meeting, according to analysts, are changes -- and the degree of those changes -- to the Fed's balance sheet. In his daily newsletter, James Moore, an analyst at TheBullionDesk.com, said an indication of the Fed's expanding its balance sheet would likely boost investor confidence in stocks and the industrial metals.

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"This would likely prove negative for gold, short term. However, the longer-term inflationary implications will no doubt increase demand for gold as investors diversify into more tangible assets," Moore said.

As investors awaited key economic news out the U.S., Indian gold shoppers remained sidelined for another day as near-record prices "offered nothing in the way of incentives to lure them out to local dealers during the present festival period," Kitco analyst Jon Nadler wrote in a daily note.

Silver prices settled 16 cents lower at $20.64 per ounce while copper closed down 2 cents at $3.49 per pound.

Gold mining stocks, a risky but sometimes more profitable way to invest in gold, were trading in negative territory Tuesday. Kinross Gold (KGC) was falling 2.3% to $18.39 in morning trading, while Newmont Mining (NEM) was shedding 2% to $62.03.

Barrick Gold (ABX) was dropping 2.7% to $45.18 and Eldorado Gold (EGO) was sinking 4.2% to $18.39.

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