Gold Rises 1.3% as Traders Await Fed Decision

Spot gold traded at $4,347.91 per ounce on Wednesday. The price rose by 1.3% during the session. This movement reversed the decline seen on Monday. At that point, the metal had touched a low not seen in over a month. US futures for December delivery also increased. They rose 1.3% to reach $4,388.80 per ounce. In the domestic market, near-month contracts on the MCX gained ground. The price edged up by 1,040 rupees to 1,51,850 rupees per 10 grams. These movements occurred as investors awaited the US Federal Reserve's policy decision.

Precious metals have shown high volatility in 2026. This follows a record-breaking year in 2025. Profit-taking at the start of the year reduced demand. Rising inflation further weighed on investor appeal. These factors drove prices to a five-month low. Tensions between Washington and Iran have also impacted markets. These geopolitical issues pushed crude oil prices higher. Higher energy costs raise inflation expectations. This environment suggests central banks may keep interest rates elevated.

Fed policy drives metal valuation

Gold is sensitive to interest rate changes. Higher rates reduce the appeal of non-yielding assets. Investors often shift funds to interest-bearing instruments. Recent inflation data came in hotter than expected. Jobs data also exceeded forecasts. These economic signals strengthened the case for a rate hike. Money markets now price in a 90% chance of a quarter-point increase. Another move is fully priced in by December. Fed Chair Kevin Warsh addressed these issues at Jackson Hole. He stated that inflation is not slowing meaningfully. He reaffirmed the commitment to the 2% target.

Dollar strength pressures gold demand

A rate hike could boost demand for the US dollar. Overseas investors seek higher returns from US assets. A stronger dollar makes gold more expensive for other holders. This dynamic adds pressure to precious metal prices. Central bank purchases have provided some support. However, these buying volumes have slowed recently. Inflation has remained above the 2% target for a long period. If policymakers do not see easing price pressures, they will maintain a tight stance. This policy environment continues to challenge non-yielding assets.

Historical context for rate changes

A rate hike today would be the first since 2023. The last increase occurred on July 26, 2023. The Fed raised the target range by 25 basis points then. It held rates at that level before cutting them. The most recent reduction happened in December 2025. Domestic gold prices have seen mixed monthly results. They fell 1.34% in September so far. This followed a surge of nearly 8% in August. That August gain was the best since February. The year-to-date return for gold stands at around 12%. Data from Gold (Google News) highlights these shifting market dynamics.