Gold Holds Steady as Traders Weigh Fed Rate Hike Prospects

Gold prices held steady on July 29 as traders assessed the likelihood of a US Federal Reserve rate hike. The prospect of higher borrowing costs is typically a headwind for non-yielding gold, but bullion managed to hold near its key support level of $4,000 an ounce since late June.

The upcoming interest rate decision by the Fed is finely balanced, with about a one-in-three chance of a quarter-point hike. This level of uncertainty is unusually high so close to a decision, according to interest-rate swaps.

Gold has been under pressure since the US-Iran war began over five months ago, with high energy prices stoking inflationary pressures and raising the likelihood that interest rates will stay higher for longer. The metal has slipped by nearly a quarter during this period, but it has held its ground near $4,000.

Ahmad Assiri, a strategist at Pepperstone Group, said the upcoming rate decision 'could prove pivotal for the next leg in gold.' He warned that if policymakers deliver a more-hawkish-than-expected message, reinforcing the prospect of higher rates or signaling greater concern over inflation, gold is likely to come under some pressure.