Gold Pressured by Hawkish Fed Outlook

Gold rose above $4,300 an ounce on Thursday, recovering losses from the previous session as the recent rally in oil prices lost steam, easing inflationary pressures. Those moves followed reports that Saudi Arabia is aiming to restore around half of its East-West pipeline capacity within days and return it to full operation within six weeks. US Energy Secretary Chris Wright also said that 18 million barrels of crude and petroleum products passed through the Strait of Hormuz earlier this week. Still, gold remained under pressure after the US Federal Reserve raised interest rates and signaled another hike before the end of the year. The Fed increased the fed funds rate by 25 basis points to 3.75%-4%, as expected, marking its first rate increase in three years. Fed Chair Kevin Warsh also said inflation remains elevated, while data released last week showed core US inflation rose more than anticipated in August.

Gold remained below $4,300 an ounce on Thursday after surrendering intraday gains in the previous session, as the US Federal Reserve raised interest rates and signaled another hike before the end of the year. The Fed increased the fed funds rate by 25 basis points to 3.75%-4%, as expected, marking its first rate increase in three years. Fed Chair Kevin Warsh also said inflation remains elevated, while data released last week showed core US inflation rose more than anticipated in August. Meanwhile, gold received some support as oil prices retreated amid easing concerns over supply disruptions in the Middle East. Saudi Arabia is aiming to restore around half of its East-West pipeline capacity within days and return it to full operation within six weeks. US Energy Secretary Chris Wright also said that 18 million barrels of crude and petroleum products passed through the Strait of Hormuz earlier this week.

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.