Gold holds near $4,000 as dollar strength persists before Fed decision

The metal held above the three-month low reached the previous session, with investors avoiding large directional bets while they wait for the outcome of the two-day Federal Open Market Committee (FOMC) meeting.

Fed officials have recently suggested there is no rush to raise interest rates further, but markets are still pricing in more than an 80% chance of another rate hike at the December meeting. Inflation concerns tied to elevated energy prices continue to support expectations for additional tightening. Traders are now focused on the Fed’s policy statement and on comments from Fed Chair Kevin Warsh at the post-meeting press conference, since no updated economic projections will be released this time.

Also on the calendar are the advance reading of US third-quarter GDP and the Personal Consumption Expenditures (PCE) Price Index, both seen as important signals for the Fed’s future path and for near-term dollar direction.

A rebound in US Treasury yields from a recent three-week low, together with persistent geopolitical tension, has added further support to the dollar as a safe-haven currency. Yemen’s Houthi movement said it attacked Saudi oil pumping stations and Riyadh’s airport, while Lebanon’s Hezbollah is reported to be preparing for a possible renewal of conflict with Israel, keeping regional risk elevated.

Why it matters for markets: A firmer US Dollar driven by rate-hike expectations and bond yields typically weighs on non-yielding gold, while any Fed signal on policy direction after the FOMC decision could move the dollar, Treasury yields and precious metals broadly.

Source: FXStreet