Gold prices went sideways in Wednesday's trading session as investors stood aside to observe and assess the economic impact of the Middle East conflict ahead of the policy decision of the US Federal Reserve (Fed).
Spot gold prices slightly decreased by 0.1% to $4,994.38/ounce in this afternoon's trading session. US gold futures for April delivery also increased by 0.1% to $5,012.60/ounce.
Mr. Kelvin Wong, senior market analyst at OANDA, said that the diễn biến of gold prices will largely depend on the upcoming policy orientation of the Fed. The question is whether the Fed still expects a wave of interest rate cuts this year or will switch to a scenario of not reducing interest rates in the context of the complicated Middle East situation.
Analysts currently forecast that the Fed will keep interest rates unchanged in its second consecutive meeting, with the decision announced later in the day. At the same time, major central banks in the UK, the euro zone, Japan, Canada, Switzerland and Sweden will also hold policy meetings for the first time since the Iran conflict broke out.
Oil prices continue to stay above the 100 USD/barrel mark as Iran's attacks on the United Arab Emirates increase concerns about global supply.
According to Mr. Wong, oil prices may gradually cool down, but the geopolitical risk compensation remains, which could trigger bottom-fishing buying for gold.
The Strait of Hormuz, a route transporting about 1/5 of global oil, is still largely blocked as Iran threatens to attack oil tankers linked to the US and Israel.
The closure of this strait has caused oil prices to remain at a high level, thereby increasing inflationary pressure due to increased transportation and production costs. The inflationary environment usually supports gold as a hedging asset, but high interest rates reduce the attractiveness of precious metals due to increased yields of profitable assets.
Tensions continued to escalate after Israel confirmed that it had killed Mr. Ali Larijani, a senior Iranian security official and the highest-ranking target attacked since the US-Israel conflict with Iran broke out. An Iranian official said the country's new top leader rejected proposals to de-escalate tensions made by intermediaries.
On other precious metals markets, spot silver prices rose 0.8% to $79.90/ounce. Platinum fell 0.4% to $2,115.34/ounce, while palladium fell 0.2% to $1,598.31/ounce.
