Gold prices are experiencing a gradual increase on Wednesday, driven by elevated oil prices that exacerbate inflation worries, alongside the near-certainty of interest rate hikes in anticipation of the Federal Reserve’s policy decision. In the UAE, 24-karat gold is currently priced at Dh521.25 per gram, reflecting an overnight increase of Dh3.75. While 22-karat gold is also experiencing an upward movement at Dh 482.50 per gram. Gold has experienced a decline of over 3 percent in September, following its trading above $4,700 an ounce in late August. Bullion was trading around $4,326.82, up approximately 30 points, having closed below $4,300 the previous day. Rising energy costs are exerting upward pressure on bond yields, leading markets to assign a 92 percent probability to the likelihood of a rate increase by the Fed.

Given that gold does not generate any yield, elevated borrowing costs generally exert downward pressure on its price. Investors anticipate that Fed Chair Kevin Warsh will take decisive action against rising inflation, potentially leading to an increase in interest rates for the first time since 2023. Christopher Wong, a strategist at Oversea-Chinese Banking Corp, indicated that “If the Fed keeps the door open to further tightening, gold may be more vulnerable.” He further noted that gold prices could decline toward $4,000 an ounce if key support at $4,250 is breached. Oil prices have stabilised following a two-day increase.

This is primarily due to traders’ uncertainty regarding the duration of the offline status of Saudi Arabia’s East-West pipeline following the attacks that occurred last week. The risks to oil prices, however, remain tilted toward the upside, as stockpiles deplete rapidly and demand destruction increasingly stands as the sole mechanism to restore equilibrium in the market. Traders continuously recalibrate their projections for oil prices in light of signals emanating from Federal Reserve policy. Even so, a number of investors anticipate that gold will regain momentum as it re-establishes its conventional function as a portfolio hedge.

“A hawkish vote and messaging could lift yields again and pressure gold. Softer communication may ease the tightening of bets and help gold extend its rebound. Traders are also watching oil prices and developments in the Middle East as they remain near-term risks,” stated Andrei Constantin. Silver is experiencing an upward trend, increasing by 1.93 percent on Wednesday, now priced at $64.56 per ounce. In contrast, platinum has decreased by 0.2 percent, while palladium has seen a slight rise of 0.1 percent. The Dollar Spot Index, a measure of the US currency, increased by 0.1 percent following a 0.6 percent rise over the previous two sessions.