Gold rose more than 1% on Wednesday after the Federal Reserve left its benchmark rate unchanged for a fifth consecutive meeting and the dollar eased. Three regional Fed presidents dissented in favor of a quarter-point increase, and renewed Middle East attacks sent oil back up, reviving inflation concerns.
Gold jumped more than 1% on Wednesday as the dollar eased after the Federal Reserve held its benchmark interest rates for the fifth straight month, with three Fed chiefs dissenting in favor of raising rates by a quarter percentage point.
XAU/USD jumped 1% to $4,072.11 at 14:07 ET (18:07 GMT). U.S. gold futures jumped nearly 1% to $4,077. The precious metal turned the table after dropping more than 1% in the previous session, pressured by a stronger U.S. dollar and higher Treasury yields ahead of the policy decision.
Fed holds at 3.50%-3.75% as three presidents dissent
The Federal Open Market Committee voted 9-3 to hold the federal funds rate at 3.50%-3.75%, in a decision that came amid heightened uncertainty. Dallas Fed President Lorie Logan, Cleveland's Beth Hammack and Minneapolis Fed chief Neel Kashkari dissented in favor of raising rates by a quarter percentage point.
Markets had broadly expected the Fed to stand pat, but expectations for a rate increase had risen in recent weeks as volatile oil prices fuelled renewed inflation concerns. Higher-for-longer interest rates typically weigh on gold by increasing the opportunity cost of holding the non-yielding asset.
Middle East strikes resume and oil rebounds more than 4%
Investors also monitored renewed tensions in the Middle East after the U.S. military said it intercepted multiple ballistic missiles launched by Iran towards American forces in the region. Iran's Revolutionary Guards later said they had targeted a U.S. air base and a U.S. Central Command facility in Jordan, raising concerns that the recent diplomatic pause could prove short-lived.
Iraq's Iran-aligned Popular Mobilization Forces said U.S. and Saudi forces carried out airstrikes on its headquarters across several Iraqi provinces. Saudi Arabia has separately said it intercepted drones launched from Iraqi territory targeting oil facilities and has blamed Iran-backed militias for the attacks.
Those exchanges ended a four-day pause in direct military exchanges between Washington and Tehran and raised the risk of renewed escalation after a brief diplomatic opening. Oil prices rebounded more than 4% on Wednesday after the latest exchange.
According to ING analysts: "Higher oil prices amid a re-escalation in the Middle East will weigh on gold", reigniting inflation concerns.
Traders turn to PCE and payrolls
Attention now shifts to U.S. economic data later this week, including the personal consumption expenditures price index and July payrolls report, for further insight into the outlook for interest rates.
Among other precious metals, silver prices rose about 1% to $57.63 an ounce. Platinum fell 0.8% to $1,594.30 an ounce.
Benchmark copper futures on the London Metal Exchange slipped 0.6% to $13,610.00 a ton. U.S. copper futures shed 0.7% to $6.313 a pound.
Source: Investing.com
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