NEW YORK: Gold prices rose on Wednesday, following a slight retreat in the dollar, as investors waited to see whether the Federal Reserve would opt for the sharpest US rate hike since 1994. Spot gold rose 0.5% to $1,816.79 per ounce by 1:35 p.m. EDT (1735 GMT), while US gold futures gained 0.3% to $1,819.50.

The dollar is trading marginally lower, boosting gold ahead of the Fed’s rate decision, DailyFX analyst Warren Venketas said. The policy decision is due at 2 p.m. EDT (1800 GMT), with many traders, according to CME’s FedWatch Tool, pricing in a 75 basis point hike from the Fed.

The dollar index was down 0.1%, while Treasury yields also dipped. Uncertainty regarding the outcome of Wednesday’s FOMC meeting is also prompting some buying interest in safe-haven metals, said Jim Wyckoff, senior analyst at Kitco Metals.

Although gold is considered a hedge against inflation, rate hikes increase the opportunity cost of holding non-yielding bullion. With markets participants almost fully pricing in two consecutive 75 bps hikes, “gold and risk markets alike could be set up for a short-squeeze,” TD Securities said in a note.

Investors also took stock of data showing an unexpected fall in US retail sales in May amid record high gasoline prices. Meanwhile, Goldman Sachs said a “wealth shock” due to lockdowns in China merely delayed rather than derailed its upside view for bullion.

A rebound in emerging market demand, strong ETF inflows, central bank buying amid US growth weakness into 2023 all augur well for gold, the bank said, projecting a three-month price target of $2,100 an ounce. Spot silver rose 1.4% to $21.37 per ounce, while platinum was up 0.8% at $927.84. Palladium rose 2.2% to $1,855.02 per ounce.