Gold Stabilizes Ahead of Fed Rate Decision
Gold prices have stabilized at $4,300.96 per ounce after hitting a one-month low of $4,293 on Monday, according to data available up to 0157 GMT. This comes as investors await the US Federal Reserve's policy decision, which is expected to be announced at 1800 GMT on Wednesday.
The Fed is likely to raise its benchmark rate by a quarter of a percentage point to a 3.75%-4.00% range, according to financial markets' bets. IG market analyst Tony Sycamore notes that 'How Fed Chair Kevin Warsh frames that hike will matter more than the hike itself for gold.' If Warsh signals a preference for a measured pace, it could be supportive for risk sentiment and gold prices.
However, if he casts the hike as the start of a tightening cycle, it would likely have a negative impact on gold and risk assets. Gold often loses appeal when rates increase, as higher interest rates raise the opportunity cost of holding non-yielding bullion.