Gold price posted substantial losses as amid broad-based liquidation in commodities and a rally in the U.S. dollar

While the sovereign debt concerns in Europe dominated the headlines last week, this coming week the focus is likely shift back to the United States. There the Federal Reserve will hold its two-day Federal Open Market Committee (FOMC) meeting on Tuesday and Wednesday. The Bernanke-led Fed recently chose to expand the meeting from one to two days due to heightened market and economic turmoil stemming from sovereign debt issues and concerns of a renewed recession in the U.S.

At the previous FOMC meeting in August, the Fed shifted its policy by committing to leaving the Fed fund rate near zero through mid-2013, but stopped short of launching a third round of quantitative easing (QE3). Although the September nonfarm payrolls report came in far worse than expected by most economists, the likelihood of a QE3 announcement this week is small, at least according to UBS’ Schnider. ”If people are expecting a QE3 right now, they could be disappointed. The hurdle is very high for a QE3.”

The gold price posted substantial losses near $1,779 Tuesday morning as amid broad-based liquidation in commodities and a rally in the U.S. dollar. The price of gold climbed to as high as $1,832 per ounce in overnight trading but relinquished its gains ahead of the open of U.S. equity markets. In contrast to the gold price, silver declined alongside cyclical commodities, by 3.7%, to $39.33 per ounce. The stability in the price of gold came after European policymakers failed to develop any new concrete plans for dealing with a potential Greek default in meetings over the weekend.