Gold edged up on Wednesday and erased earlier losses as lower oil prices eased inflation fears. Traders now look to the Federal Reserve meeting next week, where markets expect rates to stay unchanged before a possible hike in December.
Gold rose 0.3% to $4,138.17 an ounce in spot trading at 09:28 ET on Wednesday. A dip in oil prices soothed inflation concerns and helped the metal recover its earlier losses.
Futures also gained 0.3% to $4,156.25 an ounce, according to Investing.com.
Oil swings on conflicting Iran reports
Brent crude was down 0.5% at $108.28 a barrel as traders weighed conflicting reports about the Iran war. The Wall Street Journal reported that Gulf oil exports have recovered to pre-war levels, helped in part by U.S. security aid for vessels crossing the Strait of Hormuz. The Financial Times, meanwhile, reported that Netanyahu is pushing to resume large-scale strikes against Iran.
On Tuesday, gold initially found support as energy prices fell on hopes for easing Middle East tensions. It quickly surrendered those gains when oil bounced.
Fed outlook keeps pressure on the metal
Gold has fallen more than 1% since the start of the week. It remains down around a fifth since the Iran conflict erupted in late February. Worries over energy-driven inflation have fed bets that central banks may need to tighten policy, and higher borrowing costs are a possible headwind because gold does not pay interest.
Fed Chair Kevin Warsh's remarks on Friday did little to shift expectations that the central bank will leave rates unchanged on October 27-28. Markets price in less than a one-in-six chance of a quarter-point increase at that meeting. Still, with inflation well above the Fed's 2% target, traders see roughly a 75% probability of another rate hike later this year, according to CME FedWatch.
Source: Investing.com
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