Gold holds steady near $5,000 ahead of Fed rate decision
- Gold price flat lines around $5,000 in Wednesday’s early Asian session.
- Escalating tensions in the Middle East could boost Gold, a safe-haven asset.
- The rise in energy prices has intensified fears of inflation, which could delay anticipated rate cuts by the Fed.
Gold price (XAU/USD) trades on a flat note near the $5,000 psychological level during the early Asian session on Wednesday. Traders are cautious ahead of the US Federal Reserve (Fed) interest rate decision.
The war in Iran showed no signs of ending. Israel said it killed Iran’s security chief, Ali Larijani. The development came after Tehran set a massive natural gas field in the United Arab Emirates (UAE) ablaze overnight. US President Donald Trump threatened to expand strikes on Kharg Island, Iran’s main export hub. Rising tensions in the Middle East, specifically involving Iran and the UAE, could boost a traditional safe-haven asset such as yellow metal.
Fears that surging crude oil prices will lead to a rise in inflation have dampened expectations for US interest rate cuts in the near term. This, in turn, could weigh on a non-yielding asset. Goldman Sachs economists predicted rate cuts in September and December, versus June and September previously.
"With higher oil prices comes higher inflation. If we do have higher inflation, central banks are not going to be as motivated as they were six months ago to cut rates, which is a negative for gold prices," said Bob Haberkorn, senior market strategist at RJO Futures.
The Fed is widely expected to hold interest rates steady at its current target range of 3.50% to 3.75% during the March meeting on Wednesday. Traders will take more cues from Fed Chair Jerome Powell’s remarks after the rate decision. Any hawkish comments from Powell could lift the US Dollar (USD) and undermine the USD-denominated commodity price in the near term.
