Gold falls toward $4,040 as dollar edges higher ahead of Fed decision

 Gold prices fell on Wednesday as investors awaited the Federal Reserve’s interest-rate decision, with a slightly higher U.S. dollar adding pressure to bullion despite bargain buying and hopes that easing oil prices could temper inflation risks.

At 00:57 ET (04:57 GMT), spot gold fell 0.6% to $4,037.98 an ounce, while U.S. gold futures declined 0.6% to $4,051.32. slipped 0.9% to $53.9100 an ounce, while dropped 0.7% to $1,533.06. fell 0.6% to $1,030.40, while palladium futures declined 0.2% to $1,026.75. The U.S. Dollar Index edged up 0.1% to 102.42.

Bullion was holding on to a 1.1% gain from the previous session, while oil prices were little changed after falling for two consecutive days. Investors were monitoring the outcome of a closely contested Israeli election, while global stocks advanced as enthusiasm for artificial intelligence investments returned following last week’s selloff.

Gold has recently come under pressure from the broader unwinding of the AI trade, with investors selling bullion to cover losses elsewhere when technology stocks fell. The metal dropped to its lowest level since mid-July on Friday.

Although prices have dipped below $4,000 an ounce in recent days, physical buyers and bargain hunters have helped limit a more sustained decline.

Demand from Chinese households has provided additional support, with buying interest in bullion strengthening over the past two months as prices softened and domestic equities lost their appeal. These purchases have helped establish a floor under prices despite broader market volatility, according to ANZ.

The Federal Reserve is widely expected to leave interest rates unchanged at its meeting on Wednesday, a prospect that supports gold because the metal does not pay interest. However, traders continue to anticipate a possible rate increase before the end of the year, as elevated energy costs sustain inflation concerns.

Fed Chair Kevin Warsh faces the challenge of reassuring investors that the central bank remains committed to bringing inflation under control even if policymakers decide to hold rates steady this week. His communication will be closely watched for signals about the likely direction of policy beyond the October meeting.

Investors will also look to the U.S. personal consumption expenditures price index, the Fed’s preferred inflation gauge, for further clues on the outlook for interest rates in December. The September PCE report is due Thursday and could influence expectations for the next policy move.