(RTTNews) – Gold prices have soared on Wednesday, partially offsetting the losses from the two previous sessions, as crude oil prices plummet amid expectations of an interest rate hike by the U.S. Federal Reserve today.
Front Month Comex Gold for October delivery has surged by $52.40 (or 1.22%) to $4,351.40 per troy ounce.
Front Month Comex Silver for October delivery has also soared by $1.143 (or 1.80%) to $64.490 per troy ounce.
The two-day monetary policy meeting of the Federal Open Market Committee began on Tuesday. Today, the U.S. Federal Reserve is set to announce its decision on interest rates at the conclusion of the meeting.
Last week’s inflation numbers came in well above the Fed’s target of 2%. Among economists and traders, expectations of an interest rate hike are running high.
If the Fed raises its benchmark rates, this will be the first hike since 2023.
Since oil is a dollar-denominated commodity, when the U.S. dollar strengthens, crude oil becomes expensive for overseas buyers.
In addition, a high-interest rate regime can slow down economic activity considerably as the cost of borrowing shoots up for consumers as well as businesses.
In effect, it can reduce fuel consumption which could lessen the demand for crude oil. The downward pressure on oil prices pushed gold prices higher.
However, concerns of crude oil supply disruptions remain high, with both the U.S.-Iran conflict (which erupted late February) and the Saudi Arabia-Houthi conflict (which started recently) showing no signs of easing.
At the insistence of Oman, a meeting between the foreign ministers of the Gulf Cooperation Council with Iranian leaders was slated to be held in Oman’s port city of Salalah on Monday to explore ways to resolve the U.S.-Iran crisis and speed up the reopening of the Strait of Hormuz.
However, Sunday evening, hours before the discussions were to begin, Oman’s Foreign Minister Badr Albusaidi announced the postponement of the meeting.
U.S. President Donald Trump messaged through Truth Social that Iran is seeking a deal with the U.S. badly but Iran denied Trump’s claims and asserted that Iran would agree to talks only if its conditions are met.
Following last week’s drone attacks by Houthis on its vital East-West pipeline, Saudi Arabia had shut the line.
Today, Saudi Arabia announced that its air defenses intercepted and destroyed a drone that attempted to enter Mecca. While Saudi Arabia claimed that the drone was launched by the Houthi militants, the Iran-backed militia denied it.
Citing two Israeli officials, Axios reported that top military commanders from the U.S., Israel, and several Arab nations met in Germany last week to discuss the U.S.-Iran conflict.
The meeting was reportedly organized by the Commander of U.S. Central Command Admiral Brad Cooper to discuss ways to effectively prevent the progress made by the Houthis.
The rebels advanced in their attempt to gain control over the Bab el-Mandeb Strait in the Red Sea.
On the economic front, the Mortgage Bankers Association of America revealed that the Purchase Index in the U.S. decreased to 156.20 on September 11 from 157.50 of the previous week.
According to the CME Group’s FedWatch Tool, investors are currently betting on an 88.70% chance of a 25-basis-point interest rate-hike at the end of today’s meeting of the U.S. Federal Reserve.
While the odds for a quarter-point rate hike stood only at around 36% last month, hawkish remarks by U.S. Federal Reserve Chair Kevin Warsh and the recent inflation data along with firm labor market numbers, revived the expectations for a rate hike.
Traders are awaiting the press conference by Warsh after the interest rate announcement to gather clues on Fed’s rate path in the coming months.
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