Markets Await Fed Rate Hold and BOJ Hike Signal as Gold Steadies Above $4,000

Investors are bracing for a Federal Reserve decision widely expected to keep interest rates on hold at its Wednesday FOMC meeting, with Morgan Stanley chief US economist Michael Gapen among those forecasting no change. The backdrop of elevated Treasury yields and lingering inflation concerns has weighed on markets, particularly small-cap stocks, though Bloomberg Intelligence's Gina Martin Adams argues that cohort is poised for a rebound as large-cap momentum fades.

Gold held above $4,000 an ounce heading into the Fed decision, reflecting a cautious tone among traders. A firmer US dollar weighed on gold in early Asian trade Tuesday, and some investors are reassessing the outlook for US rates amid concerns that inflation pressures could prompt future Fed hikes rather than cuts, contributing to some pullback in gold prices.

Meanwhile, a CNBC survey showed all respondents expect the Bank of Japan to hold its policy rate steady at 1.25% at its Friday meeting but to signal a hike in December or January, as inflation and wages in Japan continue to rise. Separately, a Bank of Korea official forecast a rise in chip output next year, a development that could support South Korea's economy if sustained AI infrastructure investment continues.