Gold rises as the dollar falls in anticipation of the Fed’s decision

The dollar index fell 0.2 percent on the day after hitting a near two-decade high the day before, while benchmark US 10-year Treasury yields also fell from multi-year highs. According to Saxo Bank analyst Ole Hansen, gold is trapped between “those focusing on yields and their possible negative influence on gold, and against that we truly have the increasing possibility of stagflation.”

Hotter-than-expected Investors have priced in a 75 basis point (bps) interest rate increase rather than a 50 basis point increase by the Fed to temper increasing price pressures, based on US inflation statistics reported last week. While gold is frequently regarded as a safe haven asset during times of economic uncertainty, rising interest rates and bond yields raise the potential cost of owning it.

In a letter, French lender Societe Generale stated that a stock market catastrophe could lead to some diversification into gold. Investors are now waiting for the Federal Open Market Committee’s interest rate announcement, which is expected at 1800 GMT.

Some of the recent changes, such as yields falling, the dollar weakening, and gold rising, might be reversed if the Fed raises interest rates by only 50 basis points today, according to Commerzbank analysts in a note. Spot silver increased by 1.9 percent to $21.48 per ounce, while platinum increased by 2.1 percent to $939.88 per ounce. Palladium prices were up 1.2 percent to $1,836.85 per ounce.