Gold nears $4,400 as Fed minutes, oil risks shape rate outlook

Gold futures approached $4,400 per ounce on Wednesday, extending gains as market participants digested the latest U.S. Federal Reserve meeting minutes and assessed risks to oil supply amid geopolitical tensions.

The Fed minutes, released Tuesday, indicated policymakers remain cautious about inflation despite recent progress, with some officials emphasizing the need for sustained evidence before considering rate cuts. The cautious tone supported gold, which benefits from lower interest rate expectations by reducing the opportunity cost of holding non-yielding assets.

Geopolitical risks in the Middle East have also bolstered demand for the safe-haven metal. Concerns over potential disruptions to oil production in the region have driven crude prices higher, increasing inflationary pressures that could delay monetary easing by major central banks, including the Fed.

Spot gold was last up 0.7% at $4,385.29 per ounce by 10:45 a.m. London time, having earlier touched $4,398.90. U.S. gold futures for June delivery rose 0.8% to $4,402.10 per ounce.

Analysts noted that while gold’s rally reflects a combination of macroeconomic caution and geopolitical uncertainty, the metal’s upside may be capped by the Fed’s data-dependent approach to policy. "The market is pricing in a slower path to rate cuts, which supports gold, but the metal remains sensitive to any signs of stronger-than-expected economic data," said a commodities strategist at a major bank.

Oil prices contributed to the upward pressure on gold, with Brent crude futures up 1.2% at $88.45 per barrel and West Texas Intermediate (WTI) crude rising 1.1% to $84.10 per barrel. The rise in energy costs increases the likelihood of persistent inflation, reinforcing the case for a more gradual easing cycle.

Investors will continue to monitor upcoming U.S. economic data, including Friday’s core Personal Consumption Expenditures (PCE) price index, for further clues on the Fed’s policy trajectory. Any unexpected acceleration in inflation could temper gold’s gains, while a dovish shift in rhetoric may extend its upward momentum.

The interplay between Fed policy expectations and geopolitical risks is expected to keep gold prices volatile in the near term, with traders closely watching developments in both the energy and monetary policy spheres.