Gold muted as investors brace for Fed rate decision

Gold prices remained subdued on Wednesday as investors prepared for the U.S. Federal Reserve's policy decision, with a rate hike widely anticipated. Spot gold fell 0.1% to $4,288.48 per ounce, as of 0143 GMT, after hitting a more than one-month low on Monday. US gold futures for December delivery also dropped 0.1% to $4,328.10. Traders now estimate a 92.4% probability of at least a 25-basis-point U.S. rate increase later in the day, according to CME FedWatch.

The policy announcement will be followed by a press conference from Fed Chair Kevin Warsh. "A hawkish Fed could further pull gold down, while any soft messaging may ease bets on hikes and help the metal recover. Traders are also monitoring oil prices and developments in the Middle East," said Frank Walbaum. Gold is generally considered an inflation hedge, but higher interest rates increase the cost of holding non-yielding bullion.

The dollar maintained recent gains, and oil prices remained above $100 a barrel. A stronger dollar makes greenback-priced gold more costly for holders of other currencies, while high oil prices add to price pressures. Geopolitical tensions in the Middle East were also noted, with Saudi Arabia issuing security alerts in various regions, including Makkah and Jeddah, following a week of attacks from Iran-aligned fighters.

Commerzbank expressed surprise that gold prices had not faced greater pressure yet, attributing the resilience to persistent fiscal concerns reflected in elevated long-term government bond yields and heightened U.S. political risks. Other metal prices included spot silver at $63.67 per ounce, platinum down 0.3% at $1,770.47, and palladium rising nearly 1% to $1,301.61.