Gold prices were steady below $4,300 an ounce, trading around $4,290, as market participants anticipated the Federal Reserve's policy decision. This follows a two-day decline for bullion. Elevated oil prices were a key factor, contributing to inflation concerns and pushing bond yields higher. Traders were pricing in a 92% probability of a Fed rate hike, which typically has a negative impact on gold due to its non-interest-bearing nature.
The 10-year US Treasury yield reached its highest level in nearly two decades, climbing to 5.04%, reflecting a global bond selloff driven by strong capital investment and surging energy prices. This rise in borrowing costs further supports investor expectations for the Fed's first interest rate increase since 2023. If the Fed does not raise rates, or if Chairman Kevin Warsh is noncommittal about future increases, traders may demand even higher yields on long-term bonds to protect against persistent inflation.
Analysts, such as Christopher Wong from Oversea-Chinese Banking Corp., noted that the main uncertainty isn't about the hike itself, which is largely priced in, but rather what comes next. If the Fed signals further tightening, gold could be vulnerable and potentially drop towards $4,000 an ounce if key support at $4,250 is breached. Gold has already fallen more than 3% in September, from over $4,700 an ounce in late August, as the market recalibrates the outlook for Fed policy. However, many investors believe gold will regain momentum as a portfolio hedge. As of 8:45 a.m. in Singapore, spot gold was 0.2% lower at $4,284.99 an ounce, while silver was mostly unchanged at $63.68 an ounce.
