Gold Edges Higher as Dollar Weakens Ahead of Fed Meeting

Gold prices gained ground on Tuesday, buoyed by a decline in the US dollar and diminishing forecasts for tighter American monetary policy. Investors are currently monitoring the upcoming Federal Reserve meeting to gauge future interest rate directions.

The spot price of gold increased by 0.1% to reach $4,145.22 per ounce at 07:47 Abu Dhabi time. Concurrently, US gold futures for December delivery also climbed 0.1%, settling at $4,164.70.

Fed Policy Expectations Shift

Kyle Roda, a financial market analyst at Capital.com, noted that significant market movement is anticipated regardless of the central bank's decision. He suggested that an initial reaction could support gold if the Federal Reserve opts to keep interest rates unchanged.

Recent statements from Federal Reserve officials indicated no urgent need for further monetary tightening. This commentary has eased expectations for a rate hike during the policy meeting scheduled for October 27 and 28.

Data from CME Group’s FedWatch tool shows traders assigning an 82% probability that the Federal Reserve will maintain current interest rates next week. However, predictions for a rate increase in December remain high at 89%.

Dollar Impact and Geopolitical Factors

Higher interest rates typically exert downward pressure on gold because they raise the opportunity cost of holding the non-yielding metal. On Tuesday, the dollar index retreated, making greenback-priced bullion more affordable for holders of other currencies.

Roda added that easing tensions in the Middle East and falling oil prices could provide additional momentum for gold markets.

Oil prices rose on Tuesday, with Brent crude hovering near a five-month peak. Traders factored in geopolitical risk premiums after Houthi rebels in Yemen, who are allied with Iran, announced on Monday that they had carried out attacks on energy facilities, airports, and military targets in Saudi Arabia.

Performance of Other Precious Metals

In the broader precious metals sector, silver spot prices advanced 0.7% to $57.48 per ounce. Platinum also saw gains, rising 0.7% to $1,651.25. Conversely, palladium declined by 0.2% to trade at $1,117.87.