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Federal Reserve · Gold · Interest Rates · US Dollar
Gold (XAU/USD) slid below $4,300 during the European session after the US Federal Reserve, under new Chair Kevin Warsh, maintained its benchmark interest rate at 3.5%-3.75% but signaled a hawkish bias, projecting a 3.8% fed funds rate by year-end.
The Fed's decision eliminated language favoring further easing, leading traders to price in an 85% chance of a 25-basis-point rate hike in December, which sharply increased US Treasury bond yields and strengthened the US Dollar. This hawkish stance overshadowed a US-Iran peace deal, where US President Donald Trump and Iranian President Masoud Pezeshkian electronically signed a Memorandum of Understanding to end hostilities and reopen the Strait of Hormuz, with Trump indicating flexibility on the nuclear program deadline.
Despite the potential for the Iran deal to cap safe-haven USD demand, the prevailing hawkish Fed outlook and rising bond yields are preventing Gold from appreciating further. Traders are now monitoring the Philly Fed Manufacturing Index, Weekly Initial Jobless Claims, and comments from FOMC members for additional market impetus.
Gold remains vulnerable below the $4,350-$4,360 confluence hurdle, comprising the 38.2% Fibonacci retracement and the 200-day EMA.
