Gold Stalls Ahead of Fed Rate Decision Amid Soaring Energy Costs

Gold prices remained steady near US$4,290 an ounce on Wednesday after a two-day drop, as investors await the Federal Reserve's policy decision later in the day. The Fed is widely expected to raise interest rates for the first time since 2023, which could be negative for gold as it doesn't pay interest.

The 10-year US Treasury yield rose to its highest level in almost two decades, driven by high oil prices and soaring energy costs that are fueling inflation concerns. This has led traders to price in a 92% chance of the Fed hiking rates, which could lead to higher borrowing costs for gold investors.

According to Christopher Wong, a strategist at Oversea-Chinese Banking Corp., 'With markets already pricing a high chance of a Fed hike this week, the main uncertainty is less about the hike itself, and more about what comes after.' If the Fed keeps the door open to further tightening, gold may be more vulnerable and move lower toward US$4,000 an ounce if key support at US$4,250 is broken.