United States — Gold prices moved higher on Wednesday, supported by a weaker U.S. dollar, lower oil prices and declining Treasury yields as investors awaited the Federal Reserve’s interest-rate announcement.
Spot gold rose 0.7% to $4,324.36 per ounce at 0842 GMT after reaching a more than one-month low on Monday. U.S. gold futures for December delivery gained 0.8% to $4,365.
The Federal Reserve was scheduled to announce its decision at 1800 GMT, with Fed Chair Kevin Warsh set to follow with a press conference.
Investors were largely anticipating tighter monetary policy. According to the CME FedWatch Tool, traders were assigning a 93% probability to at least a 25-basis-point U.S. rate hike.
Because gold does not pay interest, higher interest rates can increase the opportunity cost of owning the metal. As a result, expectations for monetary policy have become an important influence on gold prices.
The weaker dollar also helped support bullion. When the U.S. currency declines, dollar-denominated commodities such as gold become cheaper for buyers using other currencies, which can encourage demand.
Nikos Tzabouras, a senior market analyst at Jefferies-owned Tradu.com, said gold was receiving support from weaker dollar strength, cooler oil prices and lower U.S. bond yields.
However, he said the metal’s short-term technical outlook remained negative and that its direction would depend significantly on the Federal Reserve’s decision.
Oil prices fell after rising during the previous two sessions, while the dollar also weakened modestly. The two developments provided additional support for gold.
Inflation remained another key consideration for the precious metals market. Rising energy costs can contribute to higher consumer prices, potentially increasing pressure on central banks to keep interest rates elevated or raise them further.
Tzabouras said persistent supply disruptions that keep crude oil and consumer prices high could maintain pressure for tighter monetary policy, which would be negative for gold. He also cited growing fiscal deficits as a factor that could weaken confidence in the dollar and support demand for hard assets.
Gold was consequently being influenced by opposing forces. Higher borrowing costs can reduce the appeal of bullion, while inflation concerns, deteriorating government finances and worries about the purchasing power of currencies can encourage investors to hold gold.
Other precious metals posted mixed moves during Wednesday trading. Spot silver increased 1% to $64.30 per ounce, while platinum declined 0.2% to $1,771.65. Palladium gained 1.2% to $1,304.94.
The Federal Reserve’s rate decision and Warsh’s subsequent comments were expected to provide the next major indication of the direction for gold markets.
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