Spot gold rose 1.2% to $4,346.46 an ounce on Wednesday, rebounding from two consecutive sessions of losses, as markets await the Federal Reserve's interest-rate decision. Gold futures gained 1.3% to $4,388.34 an ounce.
Traders are pricing in roughly a 92% probability that the Fed will implement its first rate hike since 2023, a stance kept alive by elevated energy costs and rising borrowing costs across global markets.
The pressure on gold this month has been largely driven by those same forces — high energy prices and increasing rates that make income-generating assets more attractive relative to bullion, which pays no yield. A stronger dollar also tends to weigh on the non-U.S. buyer demand for gold.
Energy risks spilled into fixed income on Tuesday, pushing the 10-year U.S. Treasury yield to its highest level since 2007 before stabilizing. The U.S. dollar index traded near flat.
In commodities, a two-day rally in oil prices stalled after data showed an unexpectedly large build in U.S. crude inventories. Crude remained supported by ongoing uncertainty over the duration of the shutdown of Saudi Arabia's east-west pipeline, which had been transporting millions of barrels daily around the disruption in the Strait of Hormuz. Saudi Aramco has delayed some deliveries to European customers.
Neil Welsh, head of metals at Britannia Global Markets, said the tone of the Fed's communication would be pivotal. "A measured message could allow the developing base to hold, while a more hawkish signal would risk renewed dollar strength and pressure on non-interest-bearing commodities," he said.
