Gold stalls as investors await Fed rate decision amid rising oil and dollar
Gold prices hovered around $4,037, down 0.57% on the day, as markets awaited the Federal Reserve's policy announcement and oil prices rebounded.
Gold (XAU/USD) held near $4,037 on Wednesday, slipping 0.57% amid anticipation of the Federal Reserve's monetary-policy decision due at 18:00 GMT. A modest pullback in oil prices earlier helped bullion recover from its lowest levels since July, but renewed gains in oil and a firm U.S. dollar limited further upside.
The U.S. Dollar Index was around 102.33 after hitting a two-week high of 102.49, while West Texas Intermediate crude rose about 3% to $102.60 a barrel following reports that Washington warned Gulf states of a possible military operation against Iran after the U.S. midterm elections. Higher energy costs have kept inflation pressures elevated since the conflict in the Middle East began in late February, prompting the Fed to continue tightening policy.
The Fed raised rates by 25 basis points in September and signalled another increase before year-end, aiming to bring inflation back to its 2% target. Markets expect rates to stay unchanged at 3.75%-4.00% at the October meeting, with an 85% probability of a hike in December according to the CME FedWatch Tool.
"Combined with the recent softer PCE readings, the labour data remove much of the pressure to hike immediately," analysts at ABN Amro said, adding that policymakers have "six weeks to assess whether the latest inflation strength represents persistent pressure or another temporary bump."
Technical indicators show a bearish bias, with XAU/USD trading below its 50-day, 100-day and 200-day simple moving averages. The Relative Strength Index sits at 39, indicating weak buying momentum, and the MACD remains negative. Immediate support lies in the $4,000-$3,950 range, while resistance is near $4,218, $4,278 and potentially $4,400 if the metal recovers.
Analysts note that guidance on the policy outlook could move markets more than the decision itself; a signal that further hikes remain possible could strengthen the dollar and threaten gold’s $4,000 support level, whereas a less hawkish tone might support a short-term rally.