Gold rises ahead of Fed decision as fall in oil reduces dollar's strength

Gold prices rose on Tuesday, just a day before the Federal Reserve's big interest rate call. Falling oil prices helped soften a stronger dollar, leading to a modest rise in bullion.

Spot gold rose about 1.1% to $4,060.33 an ounce. Gold futures rose 0.9% to end the session at $4,073.10 an ounce. For more market insights, InvestingPro is now offering 55% off.

The Fed is expected to remain

After a quiet week with few triggers for precious metals traders, this week has brought a lot of data and decisions from the Fed. The Federal Open Market Committee began a two-day meeting on Tuesday. Most analysts expect the committee to leave rates unchanged after the September hike, the first since 2023.

Despite recent US consumer and producer price numbers coming in higher than expected, the upside potential remains strong. Adding to the uncertainty, Fed Chairman Kevin Wersh recently declined to provide any forward guidance.

Higher rates typically put pressure on non-yielding assets like gold and boost the dollar, which could make bullion costlier for buyers abroad.

Traders will also get two key economic readings a day after the Fed's call: third-quarter US GDP data and the September personal consumption expenditure (PCE) price index, the Fed's favorite inflation gauge.

Oil dropped due to diplomatic pressure

Oil prices in the Middle East fell, leading to a further rise in gold prices. Crude futures fell 1.5% to $114.10 a barrel.

The decline came as diplomatic talks eased concerns over supply disruptions. Iran hosted a four-way meeting with Pakistan, Saudi Arabia and Türkiye. Iranian state media said the talks, led by Mohsen Rezaei, secretary of the Supreme National Security Council, focused on regional security and stability. Saudi Defense Minister Prince Khalid bin Salman, Pakistan Army Chief Asim Munir and Türkiye's intelligence chief also attended. Reports said Rezai met with Supreme Leader Ayatollah Mojtaba Khamenei on Tuesday.

Diplomatic efforts have somewhat quelled immediate fears of a US-Iran flare-up, but investors remain concerned about whether the peace will last.

Roshni Nair and Scott Kanowski contributed to this article.

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Key tips for gold traders

• Gold is up about 1% to trade around $4,060 an ounce ahead of the Fed meeting.
• The Fed is widely expected to keep rates steady after the September hike.
• If the Fed keeps the rates intact, then the strong pressure of the dollar on gold may reduce.
• Oil's 1.5% decline to $114 a barrel removes some bullish risks for gold.
• Watch Q3 GDP and September PCE data released after the Fed's decision for further direction.