Gold ticks higher as markets brace for Fed decision

Gold prices edged up on Wednesday, supported by some technical buying, as investors hunkered down for the Federal Reserve's interest rate decision later today.

Spot gold XAU= gained 0.22% to $4,036.09 per ounce by 0908 GMT, while U.S. gold futures GCcv1 for August delivery were steady at $4,037.3.

"Gold is holding up today on dip-buying around the psychological $4,000 level, prospects of a US-Iran diplomatic off-ramp and market expectations for a Fed hold," said Nikos Tzabouras, senior market analyst at Jefferies-owned Tradu.com.

The Fed's policy decision is due at 1800 GMT, along with Fed Chair Kevin Warsh's comments scheduled at 1830 GMT.

Market participants widely expect the central bank to hold rates steady. Still, about 31% are pricing in a 25-basis-point hike, according to the CME FedWatch Tool. FEDWATCH

"Today's announcement and press conference could spark significant volatility. Any hawkish signals would open the door to new 2026 lows, currently sitting at $3,941, while any dovish tilt would give bullion the opportunity to extend its rebound beyond $4,100," said Tzabouras.

Traders are expecting a 77% chance of an increase in the central bank's September meeting.

While gold is typically seen as an inflation hedge, bullion tends to suffer in a high interest rate environment due to its non-yielding characteristic.

Meanwhile, the Bank of England and the Bank of Japan are widely expected to keep rates unchanged this week, and to caution against rising inflation.

Commerzbank on Tuesday lowered its year-end gold price forecast to $4,500 per troy ounce and said it expects silver to reach $67 per troy ounce by the end of the year.