Gold Rebounds Toward $4,350 Ahead of Fed Decision as Rate Hike Expectations Remain Elevated
Gold prices rebounded on Wednesday after posting losses for two consecutive sessions, climbing toward $4,350 per ounce as investors positioned themselves ahead of the Federal Reserve’s policy decision later in the day.
Elevated oil prices and rising U.S. Treasury yields continued to highlight inflation risks, while markets priced in roughly a 92% probability of a Federal Reserve interest rate increase.
As of 09:31 WIB, XAU/USD rose 0.8% to $4,326.44 per ounce, while Gold Futures gained 0.8% to $4,366.50. Silver (XAG/USD) advanced 1.4% to $64.59 per ounce, while platinum (XPT/USD) climbed 0.7% to $1,792.43. The U.S. Dollar Index remained nearly unchanged at 99.57.
Oil Prices and Treasury Yields Strengthen Fed Rate Hike Expectations
Gold has fallen more than 3% in September after trading above $4,700 per ounce in late August, as traders repeatedly adjusted their outlook for U.S. monetary policy. Wednesday’s rebound pushed spot gold back above the $4,300 level, although the precious metal remains well below its late-August highs.
Broader pressure has come from elevated energy prices and rising borrowing costs. Oil prices stabilized after two consecutive gains, while uncertainty surrounding the duration of the shutdown of Saudi Arabia’s East-West pipeline kept energy markets on edge.
The pipeline was attacked last week and had previously transported millions of barrels of crude oil per day to bypass disruptions in the Strait of Hormuz. Saudi Arabia has yet to indicate how long the shutdown may last or how quickly exports through Hormuz can be increased to offset the disruption.
Saudi Aramco has also delayed several shipments to European customers, adding to concerns about global supply availability.
Energy-related risks have spilled over into bond markets. The benchmark U.S. 10-year Treasury yield briefly touched 5.04%, its highest level since 2007, after rising as much as five basis points on Tuesday.
The move is part of a broader global bond selloff driven by strong capital spending and surging energy prices, both of which are contributing to inflationary pressures.
Higher Treasury yields typically weigh on gold because the precious metal does not generate interest, making income-producing assets more attractive to investors.
Fed Decision and Technical Levels Remain Key Focus
Markets are currently assigning a roughly 92% probability to a Federal Reserve rate hike, with traders expecting the central bank to deliver its first increase since 2023.
However, a rate hike is not the only risk facing bonds and gold. If the Fed leaves rates unchanged or Fed Chair Kevin Warsh refrains from signaling additional tightening, investors may demand higher yields on longer-dated Treasuries as compensation for persistent inflation risks.
Tony Sycamore, Senior Market Analyst at IG, noted that gold closed slightly lower around $4,293 overnight, pressured by higher energy prices, rising bond yields, a stronger U.S. dollar, and risk-averse positioning ahead of the Fed announcement.
According to Sycamore, gold must reclaim its 200-day moving average near $4,539 to signal that the correction from the $4,697 peak has ended and that the broader bullish trend has resumed. Until then, he sees the potential for a deeper pullback toward support around $4,200.
Despite recent weakness, gold remains significantly above the $4,000 base established in July. Many investors continue to view the precious metal as an attractive long-term portfolio hedge and expect it to regain momentum once broader market conditions become more supportive.