Gold prices moved higher on Wednesday, recovering from two consecutive sessions of losses as investors prepared for a key Federal Reserve policy decision later in the day.
Spot gold rose 1.2% to around $4,346.46 per ounce, while gold futures gained 1.3% to approximately $4,388.34.
Gold Recovers After Recent Weakness
Despite Wednesday’s rebound, gold remains lower for September.
The precious metal has faced pressure from elevated energy prices and rising borrowing costs, both of which have pushed bond yields higher.
Oil prices had also rallied sharply over the previous two sessions. However, that move paused after US crude oil inventories showed a larger-than-expected build.
Oil Supply Risks Remain in Focus
Oil prices remain elevated due to uncertainty surrounding the shutdown of Saudi Arabia’s east-west pipeline.
The pipeline was attacked last week and had been transporting millions of barrels of crude oil each day around disruptions in the Strait of Hormuz.
Saudi Arabia has not yet indicated how long the shutdown could last or how quickly additional oil shipments through Hormuz could compensate for the disruption.
Saudi Aramco has also delayed some deliveries to European customers, adding to concerns about global crude supply.
Treasury Yields Continue to Pressure Gold
Higher energy prices have also contributed to renewed inflation concerns in bond markets.
The 10-year US Treasury yield briefly reached its highest level since 2007 on Tuesday before stabilizing.
Meanwhile, the US Dollar Index was broadly unchanged.
Higher Treasury yields can weigh on gold because the metal does not generate interest. As yields rise, income-producing assets can become more attractive to investors.
A stronger US dollar can also pressure gold prices by making the metal more expensive for buyers using other currencies.
Fed Rate Decision Takes Center Stage
Markets are now assigning roughly a 92% probability to a Federal Reserve rate hike.
The move would represent the Fed’s first increase in interest rates since 2023 as policymakers respond to renewed inflationary pressures.
Because a 25-basis-point increase is largely expected, investors are likely to focus more closely on the Fed’s updated rate projections, voting patterns and guidance from Chair Kevin Warsh.
Warsh Guidance Could Drive Gold’s Next Move
The tone of the Federal Reserve’s guidance could play a major role in determining gold’s next direction.
Neil Welsh, Head of Metals at Britannia Global Markets, said a more measured message could help support the recent stabilization in gold prices.
By contrast, a more hawkish signal could strengthen the US dollar and place renewed pressure on non-interest-bearing assets such as gold.
For now, gold traders remain focused on the balance between inflation concerns, energy prices, Treasury yields and expectations for the Federal Reserve’s next policy steps.
