Gold prices rose on Wednesday, moving back above $4,400 per ounce after three consecutive sessions of losses, supported by a weaker US dollar as investors continued to assess the impact of tensions in the Middle East and the outlook for Federal Reserve monetary policy.
Spot gold gained 1.1% to $4,402.41 per ounce, while gold futures rose 0.2% to $4,445.85. Spot silver advanced 1.5% to $66.76 per ounce, while platinum climbed 1.6% to $1,848.23. Meanwhile, the US Dollar Index declined 0.2% to 98.70.
Gold’s recovery came after prices fell around 2.6% over the previous three sessions, allowing the precious metal to return above the $4,400 level as dollar weakness provided some support. Investors continue to assess whether the latest tensions in the Middle East could keep inflationary pressures elevated.
Despite the latest rebound, gold remains below the levels reached last week after stronger than expected US employment data increased market expectations that the Federal Reserve could raise interest rates at its September meeting.
Markets are currently pricing in around a 60% probability of an interest rate increase this month. Higher interest rates generally create pressure on gold because the metal does not generate income, while rising bond yields make interest bearing assets relatively more attractive.
Attention is now focused on upcoming US inflation data later this week. A stronger than expected reading could strengthen the case for another Federal Reserve rate hike and renew pressure on gold prices. In contrast, softer inflation data could give policymakers more room to leave interest rates unchanged.
At the same time, tensions in the Middle East remain a source of inflation risk. US forces recently destroyed five Iranian oil tankers carrying crude near Kharg Island, a major center for Iranian oil exports, following an attempted missile attack on a US warship. The incident raised concerns that the conflict, which has continued for months, could intensify further and cause additional disruptions to regional energy flows.
Brent crude remained close to $100 per barrel, keeping inflation risks elevated ahead of the Federal Reserve meeting. Higher energy costs can feed into consumer prices, potentially making monetary policymakers more cautious about easing financial conditions.
ANZ analysts said investors appear reluctant to build aggressive positions in gold ahead of the Federal Open Market Committee meeting, as higher energy costs contribute to rising bond yields and create pressure on the precious metal. However, analysts noted that these pressures have not stopped central banks from continuing to purchase gold.
In China, the central bank purchased around 650,000 ounces of gold in August, marking its largest monthly addition to reserves since 2023. This provided an important source of underlying demand for the metal despite the recent pressure on prices.
Gold has remained within a relatively narrow range around $4,400 since recovering from the $4,000 area in July. The latest decline pushed prices below the 200 day moving average, but longer term demand from central banks and investors continues to provide support against shorter term pressures from higher bond yields, elevated oil prices and expectations surrounding Federal Reserve monetary policy.
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