Gold is currently trading $9 higher at $1,133 due to dollar weakness ahead of the FOMC meeting later.

Traders await the FOMC rate decision and statement this afternoon which will likely be the primary driver of the markets today. It is expected that the FOMC will hold the key short-term federal-funds rate within a record low range of 0% to 0.25%, where it has been since December 2008. Continuing record low interest rates are the primary reason that gold has yet to reach the bubble phase. In the 1970s, interest rates had to be increased to well into the double digits prior to the gold bubble bursting.

US equities fell on Tuesday as a climb in producer prices raised inflation concerns. Expectations are that the CPI data may be higher than expected after the stronger than expected PPI data and this should support gold. Bernanke’s view and the consensus amongst analysts is that the recovery is very fragile and thus the stagflation scenario of runaway prices and higher interest rates remains unlikely at this time.