Gold holds steady as investors await US interest rate decision

Gold prices stabilized on Tuesday after touching their lowest level in over a month in the previous session, as investors awaited the Federal Reserve’s decision on monetary policy in anticipation of signals regarding the future trajectory of monetary policy.

Spot gold prices remained unchanged at $4,300.96 per ounce by 01:57 GMT, after recording a low since August 7 yesterday.

The Federal Reserve is set to announce its monetary policy decision at 18:00 GMT on Wednesday, following the conclusion of a two-day meeting.

Financial markets are heavily betting that Fed policymakers will raise the benchmark interest rate by a quarter percentage point to a range of 3.75% to 4.00%.

IG market analyst Tony Sycamore said, “The way Federal Reserve Chair Kevin Warsh frames this rate hike will be more important for gold than the hike itself. If he portrays it as the start of a tightening cycle where decisions are made at every meeting, it would deal a blow to gold and to risk assets in general.”

Sycamore added, “However, if he instead signals a preference for a more moderate pace, it would be somewhat supportive of risk sentiment and gold.”

Although gold is viewed as a hedge against inflation and geopolitical risks, it often loses its appeal when interest rates rise, as higher rates increase the opportunity cost of holding the non-yielding metal.

Data released on Friday showed that consumer price inflation in the United States accelerated in August, while a key core inflation gauge recorded its largest increase in four months.

On the geopolitical front, Iran-aligned Houthi rebels in Yemen launched a new wave of attacks on Saudi Arabia, causing oil prices to rise amid fears of supply disruptions.

Meanwhile, yields on 10-year U.S. Treasury bonds reached the psychologically significant level of 5% yesterday, Monday, for the first time since October 2023.

For other precious metals, spot silver rose 0.1% to $63.28, while platinum fell 0.1% to $1,757.46, and palladium dropped 0.7% to $1,283.61.