Investing.com - Gold prices posted fresh two-week highs on Tuesday as market participants looked ahead to the Federal Reserve's key interest rate decision later this week.
According to the Fed Rate Monitor Tool, the FOMC is 99% certain to hold interest rates at the current levels, in line with the committee's existing strategies.
The reaction of gold to the value of the U.S. dollar and U.S. treasury yields following the statement, the updated figures, and the press conference will be closely watched. The Fed is unlikely to modify its estimates of the terminal interest rate, providing maximum flexibility should inflation rise further. The recent surge in oil prices amplifies the challenges faced by the Fed, particularly the re-emergence of inflation concerns.
U.S. Treasury yields have seen a slight increase as markets anticipate the Fed to maintain restrictive policy levels for a longer period. Consequently, the potential for an increase in gold may face pressure in the lead-up to the Fed's decision. Other major central banks, such as the Bank of England and the Bank of Japan, are also set to make decisions on interest rates. No changes are expected from the Bank of Japan, while markets are leaning towards a 25-basis point increase from the Bank of England on Thursday.
Spot gold remained steady at $US1,932.79 per ounce after hitting its highest point since September 5 earlier in the session. Meanwhile, U.S. gold futures saw a modest increase of 0.1%, bringing the price to $US1,954.30 per ounce.