Gold Prices Teeter Ahead of Fed Rate Decision
Gold prices wavered around $4,300 an ounce as traders await the US Federal Reserve's rate decision on Wednesday. The precious metal edged 0.2 per cent higher despite inflation concerns fueled by elevated energy prices and interest rate hike bets.
The surge in oil prices has pushed bond yields higher, making borrowing costs more expensive for gold, which does not pay interest. As a result, traders are pricing in about a 95 per cent chance for the Fed to hike rates on Wednesday.
Ryan McKay, senior commodity strategist at TD Securities, warns that near-term weakness could be a buying opportunity given bullion's long-term drivers, including central bank buying and US dollar-debasement risk. Gold prices are now flirting with technical levels that would see funds turn net-bearish before the Fed's decision.
Despite the headwinds, investors remain bullish on gold, betting it will grind higher as a portfolio hedge. The 10-year US Treasury yield rose to its highest level in almost two decades due to concerns over inflation and swelling government and corporate borrowing needs.