Gold eased back from intraday highs on Thursday as investors reassessed the outlook for U.S. monetary policy following the Federal Reserve’s decision to hold interest rates steady and subsequent remarks from Chair Kevin Warsh.
At 21:01 ET (01:01 GMT), XAU/USD was trading up 0.2% at $4,074.79 an ounce, having earlier climbed as much as 1.2% to a one-week peak of $4,100.42. On the futures market, Gold Futures were quoted at $4,072.40, up 0.9%. Silver, represented by XAG/USD, advanced 0.6% to $57.98, while platinum, XPT/USD, slipped 0.3% to $1,614.87.
Fed pause lifted bullion, then gains faded
Gold initially rallied after policymakers opted not to raise rates, a move that briefly pushed benchmark Treasury yields lower and pressured the U.S. Dollar Index. Those dynamics tend to lift the appeal of non-yielding assets like gold, and the metal found short-term support in the immediate aftermath of the Fed decision.
That momentum, however, faded as markets digested Chair Kevin Warsh’s comments stressing the Fed’s determination to return inflation to its long-run 2% objective despite leaving policy unchanged. The U.S. Dollar Index was last roughly unchanged around 100.9, and benchmark Treasury yields recovered from their post-decision lows, constraining further upside in bullion.
ANZ analysts noted the same pattern: gold initially benefited from lower yields and a softer dollar but later surrendered much of its gains as investors concluded that policymakers remain inclined to keep borrowing costs elevated while evaluating the inflationary effects of tensions in the Middle East.
Market pricing for rate hikes shifts
Following the Fed announcement, markets reassessed the odds of a September rate increase. CME FedWatch data showed the probability priced for a September hike at about 64%, down from roughly 81% before the policy announcement.
Geopolitical flare-ups keep inflation risks in focus
Investors were also watching renewed tensions in the Middle East after the U.S. carried out fresh strikes against Iran overnight. U.S. Central Command characterized the strikes as "a powerful response" to what it said were attempted Iranian strikes on American forces a day earlier. President Donald Trump earlier vowed to retaliate against Tehran, saying the U.S. would respond forcefully after the military intercepted what it described as a surprise Iranian attack on U.S. forces.
The escalation lifted oil prices as traders weighed the prospect of further disruptions to energy supplies. Shipping risks were heightened after Iran-backed Houthi forces warned they would target Saudi vessels attempting to reach the Indian Ocean, prompting some tankers to seek alternative routes. Persistent strength in energy markets has reinforced concerns that inflation may remain sticky, complicating the Fed’s path toward easing monetary policy.
Eyes on U.S. inflation gauge and other central banks
Market participants are awaiting Thursday’s U.S. Personal Consumption Expenditures price index - the Fed’s preferred inflation gauge - for fresh insight into the inflation trajectory and the likely path for interest rates. Attention will also turn to policy announcements from the Bank of England and the Bank of Japan later in the week, with both central banks expected to hold rates steady.
With geopolitical tensions, energy prices and central bank communications all in play, traders continue to balance inflation risks against the evolving outlook for monetary policy, leaving bullion’s near-term direction closely tied to developments across those fronts.