Fed Decision Looms Over Gold as Dollar Strength Persists

Gold prices are hovering below $4,350 as investors await the Federal Reserve's policy decision. A brief pause in US Dollar strength is offering limited support to gold ahead of the central bank announcement.

The market consensus points to a 25 basis point interest rate hike, and investors are focused on the Fed's updated economic projections and the accompanying dot plot. The post-meeting press conference comments from Fed Chair Kevin Warsh will also be closely examined for clues on the direction of monetary policy.

Concerns about energy-related inflation are maintaining expectations that the Fed could continue to tighten policy. Crude oil prices have climbed to a new high since May 20 amid mounting worries over supply disruptions in the Middle East, contributing to a broad-based selloff in global bonds and pushing the yield on the benchmark 10-year US Treasury beyond the 5% level.

The geopolitical risks, particularly in the Middle East, are supporting the safe-haven appeal of the US Dollar, limiting the upside for gold. Higher yields and continued USD strength could act as a headwind for bullion even if risk sentiment remains fragile.