Gold Stalls Ahead of US Federal Reserve Rate Decision

Gold prices held steady on Wednesday ahead of a crucial interest rate decision by the US Federal Reserve. The metal has been trading near $4,020 an ounce, after dropping 1.1% in the previous session. This decline comes as traders assess the likelihood of a quarter-point hike by the Fed.

Interest rate swaps imply about a one-in-three chance of a hike, an unusually high degree of uncertainty so close to a decision. Higher borrowing costs are typically a headwind for non-yielding gold like bullion. Policymakers are torn between June's tamer-than-expected inflation reading and the more recent rise in oil prices following the flare-up in fighting between the US and Iran.

Ahmad Assiri, a strategist at Pepperstone Group, said that the upcoming rate decision 'could prove pivotal for the next leg in gold.' He added 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 pressure.