Gold wavers around S$4,300 as traders await Fed rate decision

[SINGAPORE] Gold fluctuated as elevated energy prices fuelled inflation concerns and kept interest rate hike bets alive ahead of this week’s US Federal Reserve’s policy decision.

Bullion edged 0.2 per cent higher to trade just above US$4,300 an ounce.

Oil’s surge has stoked inflation fears and pushed bond yields higher, and traders are now pricing in about a 95 per cent chance for the Fed to hike rates on Wednesday (Sep 16). Higher borrowing costs are typically negative for gold, which does not pay interest.

Gold prices are now flirting with technical levels that would see funds turn net-bearish before the Fed’s decision, according to Ryan McKay, senior commodity strategist at TD Securities.

Near-term weakness should be viewed as a potential buying opportunity given bullion’s long-term drivers, from central bank buying to US dollar-debasement risk, he said.

The 10-year US Treasury yield rose to the highest level in almost two decades on concerns over inflation and swelling government and corporate borrowing needs. Crude oil extended this week’s surge with Saudi Arabia’s critical East-West pipeline still offline due to attacks last week.

The precious metal is down about 3 per cent in September, after trading above US$4,700 an ounce in late August, as traders repeatedly recalibrate the outlook for Fed policy.

Despite the near-term headwinds, many investors are still betting that bullion will grind higher as it rediscovers its traditional value as a portfolio hedge.

Spot gold traded at US$4,306.57 an ounce at 3.02 pm in New York, after earlier falling as much as 0.9 per cent.

Silver was up 1 per cent at US$63.88 an ounce, while platinum and palladium also rose. The Bloomberg Dollar Spot Index, a gauge of the US currency, was up 0.2 per cent. BLOOMBERG