Fed Decision Looms Large Over Gold Prices

Gold prices remain in a corrective phase as markets await the Federal Reserve's monetary policy decision. Expectations that the Fed will keep interest rates restrictive continue to limit upside momentum, while renewed geopolitical tensions in the Middle East have increased inflation concerns and added uncertainty to the market.

A weaker US Dollar has helped limit additional downside for gold after two consecutive days of declines. Softer-than-expected US Goods Trade Balance data weighed on the US Dollar, offering temporary support to gold prices. However, rising energy prices due to military developments in the Middle East have pushed Oil prices higher and renewed inflation concerns.

Attention now turns to the Federal Reserve's policy decision and Fed Chair Kevin Warsh's comments, which could provide fresh direction for gold prices. Markets currently assign about a 30% probability of a 25-basis-point rate increase at this meeting, while expectations for a September rate hike remain elevated near 80%. A more hawkish message from the Fed could strengthen the US Dollar and Treasury yields, weighing on gold prices.