Gold Prices Rise as Oil and Yields Decline Ahead of Fed Decision
Gold prices rose over 1% on Wednesday as oil and US Treasury yields declined ahead of the Federal Reserve's interest-rate decision. Spot gold was up 1.4% at $4,353.82 per ounce, while U.S. gold futures for December delivery rose 1.4% to $4,395.10.
Bart Melek, global head of commodity strategy at TD Securities, said the market has priced in a Fed rate hike and that oil prices dropping is encouraging. He noted that if energy prices remain contained, the Fed may not be overly aggressive on tightening. Brent crude futures retreated after a two-day rally due to an unexpectedly large build in US crude inventories.
The US central bank will announce its rate decision at 2 p.m. EDT (1800 GMT), which will be followed by a press conference by Chair Kevin Warsh. Traders are currently pricing in a 93% chance of a 25-basis-point US rate hike, according to the CME Group's FedWatch Tool.
Melek said any Fed move should be seen as a measure to give assurance that they're not going to allow inflation to get out of hand. He also noted that the U.S. Treasury thinking of working on the longer end of the curve to bring yields down will ultimately be positive for gold long-term.