Gold Prices Steady Ahead of Fed Rate Decision
Gold prices remained steady on Tuesday as investors awaited the US Federal Reserve's policy decision for clues on future monetary policy. The Fed is expected to raise interest rates by a quarter of a percentage point to between 3.75% and 4.00%. However, how Fed Chair Kevin Warsh frames this hike will be crucial for gold prices, according to IG market analyst Tony Sycamore.
Warsh's tone on the rate hike will matter more than the hike itself, Sycamore said. If he signals a preference for a measured pace, it would be somewhat supportive of risk sentiment and gold prices. However, if he casts it as the start of a meeting-by-meeting tightening cycle, that would be a hit to gold and risk assets overall.
Gold often loses appeal when interest rates increase, as higher rates raise the opportunity cost of holding non-yielding bullion. Data on Friday showed US consumer prices accelerated in August, while underlying inflation posted its largest increase in four months. On the geopolitical front, Yemen's Iran-aligned Houthis launched a fresh wave of attacks on Saudi Arabia, causing oil prices to rise.