Gold traded modestly higher on Wednesday as a weaker U.S. dollar supported bullion ahead of the Federal Reserve’s policy announcement, although rising oil prices and renewed geopolitical tensions continued to fuel inflation worries.
Spot gold (XAU/USD) added 0.3% to $4,038.71 an ounce by 04:52 ET (08:52 GMT), while U.S. gold futures eased 0.03% to $4,037.65 an ounce.
The metal had retreated by more than 1% on Tuesday after a stronger dollar reduced its appeal.
Fed Meeting Dominates Market Attention
The U.S. Dollar Index slipped 0.1% but remained close to a one-month high.
Investors overwhelmingly expect the Federal Reserve to keep interest rates unchanged at the conclusion of its meeting later on Wednesday.
CME Group’s FedWatch Tool indicates a 68% probability that rates will remain unchanged, compared with a 32% chance of a 25-basis-point increase. Markets also continue to price in a strong possibility of a September rate hike.
Higher borrowing costs typically reduce demand for gold because it offers no yield.
Geopolitical Risks Support Safe-Haven Demand
Fresh military developments in the Middle East remained a key focus after the U.S. military intercepted Iranian ballistic missiles aimed at American forces.
Iran later said it had targeted U.S. military facilities in Jordan, while Iraq’s Popular Mobilization Forces accused U.S. and Saudi forces of launching airstrikes against its positions.
Saudi Arabia also reported intercepting drones targeting oil facilities and blamed Iran-backed militias.
The renewed confrontation helped lift crude oil prices by more than 4%, increasing concerns over future inflation.
ING analysts said: “Higher oil prices amid a re-escalation in the Middle East will weigh on gold in early morning trading, reigniting inflation concerns.”
Economic Data Also in Focus
Investors are now awaiting the U.S. PCE inflation report and July employment figures for additional clues on the direction of Federal Reserve policy.
Silver rose 1.4%, platinum slipped 0.5%, while copper prices weakened modestly.
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