Gold Pares Gains After Fed

Gold prices pared early gains to trade little changed around $4,300 an ounce on Wednesday as traders digested the Fed’s latest monetary policy decision. The central bank raised the federal funds rate by 25bps, as expected, and signalled at least one more rate hike this year to curb persistently high inflation. Meanwhile, the Bank of England is expected to leave borrowing costs unchanged tomorrow, while the Bank of Japan is set to raise rates on Friday. Last week, the ECB raised borrowing costs for the second time this year. Oil prices retreated today, but the situation in the Middle East remains fragile, keeping supply risks elevated. The continued energy shock is expected to add further pressure to inflation and could prompt additional monetary tightening.

Gold prices rose more than 1% to around $4,350 an ounce on Wednesday as oil prices eased following a two-day rally, while investors awaited the US Federal Reserve’s upcoming interest-rate decision for further direction. The US central bank is widely expected to raise interest rates for the first time since 2023, with markets pricing in more than a 90% probability of at least a 25-basis-point hike, according to the CME FedWatch Tool. The move could mark the first of two rate increases projected for the year, as elevated inflation and heightened tensions in the Middle East add to pressure on the Fed to contain rising costs. Several other major central banks are also due to announce policy decisions this week. The Bank of Japan is expected to raise interest rates to their highest level in 31 years on Friday, while the Bank of England is widely expected to leave rates unchanged on Thursday, with the decision considered a close call.

Gold climbed back above $4,300 an ounce on Wednesday, ending a two-session decline as gains in oil prices and bond yields lost momentum ahead of the latest US Federal Reserve policy decision. Oil prices pulled back from multi-month highs after a surprise increase in US crude inventories, although ongoing supply disruptions in the Middle East continued to support prices. Meanwhile, global bond yields steadied after their recent rise as investors turned their attention to several major central bank decisions this week. The Fed is widely expected to raise interest rates by 25 basis points, marking its first hike in around three years as policymakers work to curb inflationary pressures. Markets will also focus on signals regarding another potential increase later this year, with expectations building for a move in October or December. The Bank of Japan is likewise expected to raise borrowing costs this week, while the Bank of England is anticipated to leave rates unchanged.