Gold rises over 1% as investors digest Fed hike, oil rally stalls

Gold prices surged over 1% on Thursday as investors processed the US Federal Reserve's interest rate increase and its indication of potential additional rate hikes, while an earlier rise in oil prices faltered. Spot gold climbed 1.1% to $4,310.49 per ounce, following a near six-week low earlier in the week. US gold futures for December delivery slipped about 1% at $4,348.70.

Oil prices declined, extending losses from the prior day as news of Saudi Arabia supplying additional crude via Oman eased concerns of supply interruptions. Analyst Kelvin Wong of OANDA noted that oil prices remain a crucial factor to monitor, suggesting that further declines might bolster gold prices in the medium term. However, he added that gold is likely to remain within a range for now as the hawkish Fed message has already been largely priced into the market.

The central bank's rate hike and subsequent communications reinforced the appeal of interest-bearing assets, reducing gold's attractiveness. While gold is traditionally viewed as an inflation hedge, higher rates diminish its appeal. The Fed raised rates on Wednesday, with 16 of 18 policymakers forecasting at least one more 0.25% hike by year-end, with only two maintaining the status quo.

The Bank of England is expected to maintain rates steady on Thursday, but investors await any sign that rising energy costs may prompt the bank to follow the Fed's lead. Elsewhere, in the Middle East, Saudi airstrikes targeted Yemen, according to the Houthi rebels, as the Iran-backed forces consolidated their gains following a rapid advance.

Spot silver increased 1.4% to $63.83, platinum rose 1.6% to $1,780.55, and palladium climbed 2% to $1,295.00.