Gold prices edged higher on Wednesday as a weaker US dollar supported demand, with investors awaiting the US Federal Reserve’s interest rate decision and comments from chairman Kevin Warsh for fresh signals on inflation and the outlook for monetary policy.
Spot gold rose 0.3% to US$4,040.63 an ounce, while August COMEX gold futures were little changed at US$4,038.90. A softer dollar made the precious metal more affordable for buyers using other currencies.
Markets are pricing in a 68% probability that the Fed will leave interest rates unchanged, while a 32% chance remains for a 25-basis-point hike. Expectations for a September increase stand at 77%, according to the FedWatch tool. The Bank of England and the Bank of Japan are also widely expected to keep rates unchanged later this week.
OANDA senior market analyst Kelvin Wong said gold’s near-term direction would depend heavily on the Fed meeting, adding that a less hawkish tone could reverse the recent weakness in prices.
Geopolitical tensions also remained in focus after the US military said it intercepted multiple ballistic missiles launched by Iran towards US forces in the Middle East, while Iran’s Revolutionary Guards said they had fired missiles at a US air base and a US Central Command facility in Jordan.
Meanwhile, RHB Investment Bank Bhd (RHB Research) maintained its bearish stance on gold, advising traders to retain short positions as selling momentum continued to build. The research house said COMEX gold remained below the key resistance level of US$4,200, with prices likely to test support at US$4,000 before potentially declining towards US$3,850 if the downtrend persists. It kept the stop-loss level at US$4,200.
