Markets price in a 92% chance of a Federal Reserve rate hike.
Gold prices edged higher on Wednesday as elevated oil prices continued to fuel inflation concerns, while expectations of an interest-rate hike remained near certain ahead of the US Federal Reserve’s policy decision.
In the UAE, 24-karat gold is trading at Dh521.25 per gram, up Dh3.75 overnight, while 22-karat gold has also moved higher to Dh482.50 per gram. Despite the latest gains, gold is down more than 3% in September, after trading above $4,700 an ounce in late August.
Internationally, bullion was trading at around $4,326.82 an ounce, up by roughly 30 points after closing below $4,300 in the previous session.
Rising energy costs are pushing bond yields higher, while markets are now pricing in a 92% probability that the Federal Reserve will raise interest rates. Because gold does not offer a yield, higher borrowing costs and rising bond yields can make the precious metal less attractive to investors.
Investors expect Fed Chair Kevin Warsh to take a tougher stance against elevated inflation, with markets anticipating the Federal Reserve could raise interest rates for the first time since 2023.
Christopher Wong, a strategist at Oversea-Chinese Banking Corp, told Bloomberg that “If the Fed keeps the door open to further tightening, gold may be more vulnerable.” He added that bullion could fall towards $4,000 an ounce if the key support level of $4,250 is breached.
Oil prices hold steady
Oil prices stabilised after posting gains for two consecutive sessions, as traders remained uncertain over how long Saudi Arabia’s East-West pipeline would remain offline following last week’s attacks.
However, risks to oil prices remain tilted to the upside as inventories decline rapidly. With supply conditions remaining tight, weakening demand is increasingly seen as one of the few factors capable of bringing the market back into balance.
Gold: A safe haven
Traders continue to adjust their outlook for commodity prices in response to signals from the Federal Reserve. Despite the uncertainty, some investors expect gold to regain momentum as it reinforces its traditional role as a safe-haven asset and portfolio hedge.
Other precious metals were mixed on Wednesday. Silver rose 1.93% to $64.56 an ounce, while platinum slipped 0.2% and palladium gained 0.1%.
Meanwhile, the Bloomberg Dollar Spot Index, which tracks the performance of the US currency, edged 0.1% higher after gaining 0.6% over the previous two sessions.
