Gold prices inch lower amid hawkish Fed fears

Gold prices experienced a slight decline on Wednesday as traders refrained from making significant investments ahead of the Federal Reserve’s imminent interest rate decision. Heightened worries about a potentially hawkish outcome were fueled by the recent uptick in inflation.

Heightened Fed meeting uncertainty boosted gold demand, keeping prices above $1,900 per ounce. Yet, a robust U.S. dollar limited larger gains.

Spot gold dipped by 0.1% to $1,930.22 per ounce, while December gold futures also declined by 0.1%, reaching $1,950.95 per ounce at 00:28 ET (04:28 GMT).

Higher U.S. Treasury yields further pressured gold prices, as markets braced for a more hawkish stance from the Fed.

Anticipated Fed Pause, Yet Inflation Signals Hawkish Outlook

The Federal Reserve is widely anticipated to maintain current interest rates as their two-day meeting concludes later on Wednesday.

However, the recent surge in inflation, primarily fueled by rising oil prices, could prompt a more cautious approach from the central bank. The Federal Reserve has not ruled out the possibility of at least one more rate hike this year, which it may indicate later today.

Even if the Federal Reserve indicates no further rate hikes, it is projected to maintain interest rates at levels not seen in over two decades until at least mid-2024, which implies a subdued outlook for gold and other non-yielding assets.

Elevated interest rates increase the opportunity cost of gold investments, a factor that negatively impacted the precious metal over the past year.

Apart from the Federal Reserve, the UK and Japan are also set to announce their interest rate decisions this week.

Copper dips, awaiting more cues from China

In the realm of industrial metals, copper prices declined on Wednesday for the fourth consecutive session. This drop was influenced by the strength of the dollar and uncertainties surrounding China, a major importer of copper.

Copper futures dropped 0.3% to $3.7428 per pound.

As widely anticipated, the People’s Bank of China maintained its record-low key loan prime rates on Wednesday. The central bank is also expected to continue its liquidity measures to bolster a sluggish economic recovery.

In the upcoming week, attention will be on Chinese business activity data for September, following some improvement in August readings. However, worries about a Chinese economic slowdown have significantly impacted copper prices over the past year.

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