Gold muted as investors brace for Fed rate decision

Gold prices remained relatively stable on Wednesday as investors waited for the US Federal Reserve's upcoming policy decision, with a rate hike anticipated. Spot gold fell 0.1% to $4,288.48 per ounce, after hitting a one-month low on Monday. US gold futures for December delivery also experienced a 0.1% drop to $4,328.10. According to CME FedWatch, there is a 92.4% probability of a 25-basis-point US rate hike later in the day.

Following the policy decision, Fed Chair Kevin Warsh is expected to deliver a press conference. A hawkish Fed stance could further negatively impact gold, while softer comments might reduce expectations of rate hikes and potentially benefit the metal. Traders are also closely monitoring oil prices and developments in the Middle East, according to Frank Walbaum, a market analyst at trading platform Naga.com.

Gold is typically viewed as an inflation hedge, but higher interest rates raise the opportunity cost of holding non-yielding bullion. The US dollar remained strong, holding onto recent gains, while oil prices stayed above $100 a barrel. A stronger dollar makes gold more expensive for holders of other currencies, and higher oil prices contribute to price pressures.

Commerzbank expressed surprise that gold prices had not been more affected thus far, noting that gold's resilience could be supported by persistent fiscal concerns, reflected in elevated long-term government bond yields, and heightened US political risks. Silver remained stable at $63.67 per ounce, platinum declined 0.3% to $1,770.47, and palladium rose nearly 1% to $1,301.61.