Gold prices today: Yellow metal inches higher ahead of Fed decision

Gold prices are inching upwards on Wednesday as high oil prices continue to fuel inflation concerns and as interest-rate hike bets are near-certain ahead of the Federal Reserve’s policy decision.

In the UAE, 24-karat gold is trading at Dh521.25 per gram, an increase of Dh3.75 overnight. While 22-karat gold is also trading higher at Dh 482.50 per gram. Gold is down more than 3 per cent in September, after trading above $4,700 an ounce in late August.

Bullion was trading around $4,326.82, up 30 odd points, having closed below $4300 the previous day. Rising energy costs are driving bond yields up, and markets are now pricing a 92 per cent probability that the Fed will raise rates. Since gold pays no yield, higher borrowing costs tend to weigh on its price. 

Investors are expecting Fed Chair Kevin Warsh to tighten the whip against soaring inflation and actually go on to 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 gold prices could move lower towards  $4,000 an ounce if key support at $4,250 is broken.

Oil prices hold steady

Oil prices have steadied after a two-day gain. This is mainly as traders remain uncertain on how long Saudi Arabia's East-West pipeline will stay offline following last week's attacks. The risks to oil prices, however, are still skewed higher, as stockpiles draw down quickly and demand destruction is increasingly the only real lever left to bring the market back into balance.

Gold: A safe haven

Traders keep adjusting their oil-price outlook in response to Fed policy signals. Even so, a number of investors expect gold to regain momentum as it reasserts its traditional role as a portfolio hedge. 

"A hawkish vote and messaging could lift yields again and pressure gold. Softer communication may ease the tightening of bets and help gold extend its rebound. Traders are also watching oil prices and developments in the Middle East as they remain near-term risks", said Andrei Constantin, Commercial Director and Trading Adviser at TFP Software FZCO.

Silver too is trading higher, up 1.93 per cent on Wednesday trading at $64.56/oz.  Platinum dipped 0.2 per cent and palladium was up 0.1per cent. The Bloomberg Dollar Spot Index, a gauge of the US currency, was 0.1 per cent higher after gaining 0.6 per cent in the past two sessions.