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Gold prices experienced a slight decline on Wednesday as market participants adopted a cautious stance while awaiting the Federal Reserve's (US Central Bank) decision on monetary policy, which is widely expected to involve an interest rate hike.
The spot price of gold decreased by 0.1% to $4288.48 per ounce at 01:43 GMT, after hitting its lowest level in over a month on Monday. US gold futures for December delivery also fell by 0.1% to $4328.10.
The Fed Watch tool from CME Group indicates that traders currently expect a 92.4% probability of the US interest rate being raised by at least 25 basis points later today. The monetary policy decision will be followed by a press conference by Federal Reserve Chairman Kevin Warsh.
Frank Walbaum, a market analyst at Naga.com, said, "A hawkish stance from the Federal Reserve could lead to further declines in gold prices, while any dovish statements might reduce bets on interest rate hikes and help the metal recover. Traders are also monitoring oil prices and developments in the Middle East."
Gold is often seen as a hedge against inflation, but rising interest rates increase the opportunity cost of holding the non-yielding precious metal.
The dollar maintained its recent gains, and oil prices remained above $100 per barrel. A stronger dollar increases the cost of gold priced in the US currency for holders of other currencies, while higher oil prices add to price pressures.
On the geopolitical front, Saudi Arabia issued security warnings in multiple regions, including Mecca and Jeddah, the Kingdom's second-largest city, following a week of attacks by Iran-backed militants, which increased its involvement in the Middle East conflict.
As for other precious metals, silver remained stable in spot transactions at $63.67 per ounce, platinum declined by 0.3% to $1770.47, while palladium rose by 1% to $1301.61.
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