Fed Decision Makes Gold Shine Again
Gold prices surged after the Federal Reserve maintained its benchmark interest rate. XAU/USD traded around US$4,100 per troy ounce—up approximately 1.8%—after moving within a range of US$3,995–US$4,098 during the session. US gold futures also strengthened by about 1.47% to US$4,098.
The Fed kept the federal funds rate in the 3.50%–3.75% range for the fifth consecutive meeting. The decision was reached via a 9-to-3 vote amidst economic uncertainty and rising inflation risks stemming from the Middle East conflict.
Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan dissented from the decision. All three supported a 25-basis-point rate hike, signaling that a push for tighter policy is gaining momentum within the FOMC.
Gold gained strength as the US dollar and bond yields weakened following the decision. The US Dollar Index fell approximately 0.49% to 100.77, while the two-year US Treasury yield dropped to 4.281% and the 10-year yield fell to 4.627%. The decline in the dollar and yields eased pressure on non-yielding assets like gold.
Demand for safe-haven assets also rose as the US-Iran conflict heated up again. These tensions drove WTI crude oil up about 6.7% to US$84.58 and Brent crude up more than 7% to US$87.96 per barrel. However, the rise in energy prices could also fuel inflation and keep the possibility of a Fed rate hike alive for the next meeting.
Consequently, gold retains the potential to maintain its momentum toward the US$4,100 level if the dollar and yields continue to weaken. However, the three votes favoring a rate hike, combined with Fed Chair Kevin Warsh's commitment to the 2% inflation target, could limit further gains. The market will next closely monitor PCE inflation data and US labor reports to determine whether gold can extend its gains or undergo a correction.
Source: Newsmaker.id
