Gold prices rose on Wednesday as markets prepared for the US Federal Reserve’s latest interest rate decision, with the dollar, bond yields and oil prices influencing trading.
Spot gold gained 1.3% to $4,347.91 an ounce by 1208 GMT after touching a more than one-month low on Monday. US gold futures for December delivery also rose 1.3% to $4,388.80. Trading on the COMEX commodities exchange showed similar strength ahead of the Federal Reserve announcement.
The move followed a weaker US dollar and lower oil prices. A softer dollar can support gold by making it cheaper for buyers using other currencies. Lower bond yields can also improve the relative appeal of gold because the metal does not pay interest.
The Federal Reserve is due to announce its rate decision at 1800 GMT, followed by a press conference from Chair Kevin Warsh. The decision and accompanying guidance are likely to set the near-term direction for gold.
Markets were pricing in a 93% chance of at least a 25-basis-point increase in US interest rates. Higher rates can weigh on gold because they increase the return available from interest-bearing assets. This leaves gold sensitive not only to the decision itself, but also to any signal on the pace of future rate changes.
Oil prices remain another factor. Continued supply disruptions could keep crude prices and inflation elevated, increasing pressure on central banks to maintain tighter monetary policy. At the same time, concerns around government deficits and confidence in the US dollar continue to support demand for hard assets. These factors are helping offset some of the pressure created by expectations for higher interest rates.
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