Gold fell on Wednesday as a slightly firmer dollar weighed on bullion ahead of the Federal Reserve's interest-rate decision. Physical buyers and demand from Chinese households have limited the decline, while markets watch for signals from Fed Chair Kevin Warsh.
Spot gold fell 0.4% to $4,045.45 an ounce at 07:08 ET, as the Fed's decision loomed. Gold futures declined 0.4% to $4,058.47 an ounce.
The U.S. dollar index inched up 0.1% to 102.42. A stronger dollar can make gold less appealing to overseas buyers.
Buyers cushion the correction
Gold had recently come under pressure from the unwinding of the AI trade, with investors selling bullion to cover losses elsewhere when technology stocks fell. The metal dropped to its lowest level since mid-July on Friday.
Even so, prices that dipped below $4,000 an ounce in recent days drew physical buyers and bargain hunters, who helped limit a more sustained decline. According to ANZ, Chinese household demand strengthened over the past two months as prices softened and domestic equities lost their appeal.
Fed decision and inflation data in focus
Traders now turn to the Fed, which is widely expected to leave interest rates unchanged after its two-day meeting. However, markets anticipate a possible rate hike at the central bank's final gathering of the year in December, as elevated energy costs sustain inflation concerns.
Warsh faces the task of reassuring investors that the Fed remains committed to bringing inflation under control, and his post-decision press conference will be closely watched. Higher rates can increase the opportunity cost of holding non-yielding assets like gold.
Later this week, the September reading of the U.S. personal consumption expenditures price index could offer further insight into the outlook for rates.
Source: Investing.com
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