Gold prices rose on Wednesday after managing to stay above the key level of $4,300. The yellow metal is currently trading near the first resistance level of $4,344; if it manages to break above this level, it could extend its gains toward the next resistance level at $4,376. On the downside, if the price loses its positive momentum, it may decline toward support levels near $4,280 then $4,252.
Global markets remained volatile as investors weighed geopolitical tensions, shifting expectations for monetary policy, and growing concerns over energy supplies. Oil prices retreated after a two-day rally, while the U.S. dollar hovered near its highest levels in two weeks ahead of the Federal Reserve’s policy decision. Meanwhile, heightened tensions in the Middle East continued to raise concerns over regional security and potential disruptions to global energy markets, keeping gold and other safe-haven assets in focus. Against this backdrop, markets are closely monitoring central-bank signals, economic data, and geopolitical developments for further direction.
Saudi Coalition Announces Destruction of Houthi Drone Near Mecca
The Saudi-led coalition supporting the legitimate government in Yemen announced on Wednesday that Saudi air defenses intercepted and destroyed a drone launched by the Houthi group south of Mecca, before it entered the restricted airspace over the holy city.
Coalition spokesperson Major General Turki Al-Malki said the interception took place on Tuesday evening at approximately 6:50 p.m. local time, adding that the drone was destroyed before reaching the restricted airspace over Mecca.
Al-Malki described the incident as the second reported attempt to target Mecca, following the launch of a ballistic missile toward the city in July 2017. He stressed that the security of the Two Holy Mosques and pilgrims remains a “red line” and that the coalition would take measures it considers necessary in response to the Houthis.
The Houthis, meanwhile, denied targeting Mecca, with an official from the group rejecting the Saudi account. Reports also indicated that Saudi Arabia increased security alerts in several areas following a series of missile and drone attacks.
The incident comes amid heightened military tensions in the region and renewed Houthi attacks targeting Saudi Arabia, raising concerns over the potential expansion of the conflict and its implications for regional security, shipping, and energy supplies.
Oil Prices Decline After Two-Day Rally
Oil prices fell on Wednesday, retreating from gains recorded over the previous two sessions, as higher-than-expected U.S. crude inventories put pressure on prices, while concerns over supply disruptions in the Middle East continued to support the market.
Brent crude futures fell by around $1.22 to $107.53 per barrel, while West Texas Intermediate (WTI) crude futures declined by approximately $1.64 to $104.19 per barrel during trading.
The downward pressure followed data from the American Petroleum Institute (API) showing that U.S. crude inventories increased by approximately 7.1 million barrels in the week ended September 11, compared with analysts’ expectations for a decline of around 1.6 million barrels. Gasoline and distillate inventories also increased, adding further pressure to oil prices.
Despite the decline, supply risks remain a key concern for the market. Disruptions in the Middle East have reportedly affected oil loadings at Saudi Arabia’s Yanbu port and disrupted the East-West pipeline, while tanker traffic through the Strait of Hormuz has fallen sharply, keeping global supply concerns elevated.
Oil had posted strong gains over the previous two sessions. On Tuesday, Brent crude rose around 2.65% to $108.48 per barrel, while WTI gained approximately 4.04% to $105.49 per barrel, amid heightened geopolitical tensions and concerns over regional oil supplies.
Dollar Hovers Near Two-Week Highs Ahead of Fed Decision
The U.S. dollar hovered near its highest level in around two weeks on Wednesday, supported by rising U.S. Treasury yields and expectations that the Federal Reserve will raise interest rates at the conclusion of its policy meeting later in the day.
The dollar index, which measures the greenback against a basket of major currencies, stood near 99.59, after reaching a multi-week high in the previous session. The dollar’s recent gains have been supported by higher oil prices, which have fueled concerns about inflation and pushed U.S. Treasury yields higher.
Markets are widely expecting the Federal Reserve to deliver a 25-basis-point interest-rate increase, which would take the benchmark federal funds rate to a range of 3.75%–4.00%. Investors are also closely watching the Fed’s updated economic projections and guidance for clues about the future path of interest rates.
The dollar’s strength has also been supported by safe-haven demand amid heightened geopolitical tensions and elevated energy prices. However, the currency has shown some volatility ahead of the Fed’s decision, as traders assess whether the central bank’s communication will signal additional tightening or a more cautious approach in the months ahead.
Meanwhile, the euro was trading around $1.1554, while sterling stood near $1.3483. The Japanese yen has also remained in focus as markets assess expectations for a potential Bank of Japan rate hike later this week.
Looking Ahead
Markets are closely awaiting the release of the Federal Reserve’s Interest Rate Decision and the subsequent FOMC Press Conference, with investors looking for further clues about the central bank’s monetary policy outlook. Particular attention will be paid to the Fed’s assessment of inflation, economic growth, and labor market conditions, as well as any guidance on the future path of interest rates. The decision and policymakers’ remarks could influence the U.S. dollar, Treasury yields, gold, and broader financial markets in the near term.