Gold edges down as dollar, yields rise ahead of Fed decision

NEW YORK: Gold edged lower on Wednesday, pressured by a firm dollar and elevated US Treasury yields, while investors awaited the US Federal Reserve’s interest-rate decision and remarks from Chair Kevin Warsh later in the day for clues on its policy path. Spot gold fell 0.2percent to USD4,020.69 per ounce by 0849 EDT (1121 GMT), while US gold futures for August delivery lost 0.4percent to USD4,019.40.

Yields on the benchmark 10-year US Treasury note drifted higher. The US dollar firmed, making bullion more expensive for overseas buyers. “The stronger US dollar index and the slight uptick in Treasury yields are negative forces,” said Jim Wyckoff, a market analyst at American Gold Exchange. “But mostly, the gold and silver markets are treading water ahead of this afternoon’s FOMC decision and press conference from Chairman Warsh.”

ELEVATED OIL PRICES MAY MEAN HIGHER-FOR-LONGER RATES

The Fed’s policy-setting committee is due to announce its decision at 2 p.m. EDT (1800 GMT). Warsh is scheduled to hold a press conference beginning half an hour later. About 64percent of traders expect policymakers to hold interest rates steady in today’s meeting, while they are pricing in about an 80percent chance of a US rate hike in September, according to CME Group’s FedWatch tool.

Meanwhile, oil prices rose more than 4percent as tensions in the Middle East escalated following US and Saudi strikes in Iraq and an intercepted Iranian missile attack on US forces.

Elevated energy prices due to Gulf supply disruptions have been weighing on gold prices as they raised expectations of higher-for-longer interest rates, which tend to diminish the appeal of non-yielding gold.

Investors also await the US Personal Consumption Expenditures data for June, the Fed’s preferred inflation gauge, due on Thursday, for further cues on monetary policy.

Among other major central banks, the Bank of England and the Bank of Japan are also widely expected to keep rates unchanged this week, and to caution against mounting inflationary pressure from the Middle East war.

Elsewhere, spot silver climbed 0.2percent to USD57.25 per ounce, platinum dropped 1.2percent to USD1,588.05, and palladium dipped 1.7percent to USD1,248.29.