Gold prices rose during trading on Thursday, as investors absorbed the US Federal Reserve's decision to raise interest rates and its indication that monetary policy could be further tightened in the coming period, while the previous upward surge in oil prices lost momentum.
Spot gold rose 0.8% to $4,295.26 an ounce by 04:43 GMT, after hitting its lowest level in nearly six weeks during Wednesday's trading.
In contrast, US gold futures for December delivery fell 1.2% to $4,333.90 an ounce.
Oil prices fell, continuing their losses, following reports that Saudi Arabia was offering additional crude shipments via Oman.
Kelvin Wong, senior market analyst at OANDA, said that oil prices remain a key factor to watch, explaining that if oil prices continue to decline, this could support higher gold prices, at least from a medium-term perspective.
He added that gold will most likely continue to move within a defined price range until this scenario is realized.
Wong noted that the current rise in gold prices is largely due to technical factors, as markets have already largely priced in the Federal Reserve’s hawkish message.
Gold is traditionally seen as a hedge against inflation, but rising interest rates reduce its appeal because they increase the attractiveness of income-generating assets for investors.
The Federal Reserve raised interest rates on Wednesday and indicated the possibility of further increases in the coming months, in a unanimous decision that included Kevin Warsh, the new chairman of the US central bank, who effectively acknowledged continuing concerns about inflation.
The updated quarterly economic projections indicate that 16 out of 18 Federal Reserve officials expect at least one more 25-basis-point rate hike by the end of the year, while only two officials see interest rates remaining at their current levels.
Markets are also watching the Bank of England's decision, which is expected to leave interest rates unchanged on Thursday, with investors focused on any signs that might suggest rising energy prices could prompt the bank to take a similar approach to the Federal Reserve.
The war in the Middle East adds a new factor
On the geopolitical front, US President Donald Trump said he hoped the end of the war against Iran was near, as the seven-month-long conflict escalated, with Saudi aircraft intensifying their strikes in Yemen, while Houthi fighters launched drones and missiles toward Saudi cities.
These developments add a new factor to the equation of gold and oil prices, as energy movements continue to be linked to geopolitical risks, inflation, and monetary policy expectations.
In other precious metals markets, spot silver rose 1.2% to $63.73 an ounce, while platinum climbed 1.7% to $1,783.56 and palladium gained 2.2% to $1,296.70.
