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

Gold prices surged by more than 1% on Thursday as investors processed the U.S. Federal Reserve's rate hike and its indication of potential further tightening. The rally in oil prices, however, was fading. Spot gold increased by 1.1% to $4,310.49 per ounce, after reaching a near six-week low the previous day. U.S. gold futures for December delivery declined around 1% to $4,348.70.

Reports emerged that Saudi Arabia might provide additional oil shipments via Oman, which further dampened oil prices' gains. Analyst Kelvin Wong noted that while oil prices are a key factor to monitor, lower oil prices could benefit gold in the medium term, at least for now, keeping gold prices range-bound. The recent surge in gold is partly attributed to technical factors, as the hawkish tone from the Fed has already been priced into the market.

Despite gold being viewed as an inflation hedge, higher interest rates diminish its attractiveness by making interest-bearing assets more appealing. The Federal Reserve raised rates on Wednesday and signaled more hikes, with new central bank chief Kevin Warsh joining a unanimous decision to acknowledge the Trump administration's inability to curb inflation, which policymakers fear could worsen.

Updated economic projections indicated that 16 out of 18 policymakers expect at least one more quarter-point rate increase by year-end, with only two seeing rates staying stable. The Bank of England was expected to maintain its rates unchanged on Thursday, but investors were watching for any signs that higher energy prices might compel it to follow the Fed's lead.

In the Middle East, Saudi warplanes struck Yemen, according to the Houthis, as the Iran-backed fighters consolidated their advances after a swift advance. Silver prices climbed by 1.4% to $63.83, platinum rose 1.6% to $1,780.55, and palladium increased by 2% to $1,295.00.