To The Moon

Gold begins to recover as investors digest Federal Reserve decisions

‌$SPDR Gold ETF(GLD)$  ‌‌$Gold.com(GOLD)$  ‌

Gold prices rose in European trading on Thursday for the first time in four days, beginning to recover from a six-week low as buying emerged at lower levels, supported by a weaker US dollar against a basket of global currencies and a retreat in the 10-year US Treasury yield from its highest level in 19 years.

The rebound comes as investors digest the Federal Reserve’s decisions, which were more hawkish than markets had expected, particularly after the central bank signaled the possibility of further monetary tightening as it seeks to contain mounting inflationary pressures in the United States.

The Price

• Gold prices rose 1.65% to $4,335.42, from an opening price of $4,264.18, while recording a low of $4,257.63.

• At Wednesday’s settlement, gold prices fell 0.7%, marking a third consecutive daily loss, and hit a six-week low of $4,235.30 an ounce, pressured by a stronger US dollar and rising US Treasury yields following the Federal Reserve’s decisions.

US dollar

The US Dollar Index fell more than 0.2% on Thursday, retreating from a seven-week high of 100.37 points and reflecting a pause in the US currency’s advance against a basket of global currencies.

The decline comes amid correction and profit-taking activity as investors await further evidence on the path of US interest rates.

US Treasury yields

The yield on the 10-year US Treasury note fell around 1.0% on Thursday, retreating from its highest level in 19 years and heading for its first loss in nine sessions, putting some downward pressure on the US dollar.

Global oil prices

Oil prices fell more than 1% on Thursday, extending losses for a second consecutive day and moving further away from four-month highs, following Saudi comments that the East-West pipeline, which was damaged in a Houthi attack, would be restored to operation as soon as possible.

Federal Reserve

In line with expectations, the Federal Reserve decided on Wednesday to raise its benchmark interest rate by 25 basis points to a 3.75%-4.00% range, marking the first increase in US interest rates since July 2023.

The Federal Open Market Committee voted unanimously, 12-0, to raise the target range for the federal funds rate to 3.75%-4.00%, its highest level since October 2025.

Monetary policy statement

The Federal Reserve said in its monetary policy statement that economic activity in the United States continues to expand at a strong pace, with domestic spending remaining robust and capital investment resilient.

The US central bank noted that recent job gains have been consistent with growth in the labor force, while the unemployment rate has changed little, reflecting continued resilience in the labor market.

The Fed stressed that inflation remains elevated and that data in recent months have not provided sufficient evidence of improvement in underlying price trends, strengthening the case for higher interest rates.

The Federal Reserve also reiterated that uncertainty surrounding the economic outlook remains elevated, while it continues to monitor risks related to inflation, economic activity and the labor market.

Economic projections

The Federal Reserve’s quarterly Summary of Economic Projections, released on Wednesday, included several important revisions:

• Economic growth: The Federal Reserve raised its US economic growth forecast for this year to 2.3% from 2.2%, and increased its 2027 growth forecast to 2.4% from 2.3%. It left its 2028 growth forecast unchanged at 2.2%.

• Headline inflation: The Federal Reserve raised its headline inflation forecast for this year to 3.7% from 3.6% in its June projections. It left the 2027 forecast unchanged at 2.3% and raised its 2028 forecast to 2.1% from 2.0%.

• Core inflation: The Federal Reserve raised its core inflation forecast for this year to 3.4% from 3.3% in June. It left the 2027 forecast unchanged at 2.5% and raised its 2028 projection to 2.2% from 2.1%.

• Target interest rate: The Federal Reserve raised its target interest rate projection for this year to 4.25% from 3.75%, increased its 2027 projection to 4.25% from 3.50%, and raised its 2028 projection to 4.0% from 3.25%.

Kevin Warsh

The following are the key remarks from Federal Reserve Chair Kevin Warsh during the press conference following the meeting:

• The US economy has improved since the June meeting, with economic activity remaining strong and the labor market resilient.

• Inflation remains elevated, while data over the summer have shown no meaningful improvement in underlying inflation trends.

• Many price categories are rising by more than 3% on both a six-month and 12-month basis, reflecting persistent inflationary pressures.

• Warsh said it was difficult to characterize financial conditions as restrictive, a view that was widely shared within the Federal Open Market Committee.

• He said the Federal Reserve had removed some degree of monetary accommodation by raising interest rates for the first time in three years.

• Warsh stressed that price stability remains the central bank’s primary objective and that the rate increase represents a step toward returning inflation to the 2% target over the medium term.

• He provided no forward guidance on the next meeting, stressing that he would not prejudge future decisions and that monetary policy would depend on incoming data and economic trends.

• Warsh noted that the Federal Reserve focuses on broader trends rather than any single economic reading when setting monetary policy.

US interest rates

• Following the meeting, according to the CME FedWatch Tool, the probability of the Federal Reserve leaving interest rates unchanged at its October meeting fell from 52% to 47%, while the probability of a 25-basis-point rate hike rose from 48% to 53%.

• The probability of the Federal Reserve leaving interest rates unchanged at its December meeting currently stands at 10%, while the probability of a 25-basis-point rate hike is priced at 90%.

• Investors will closely monitor further US economic data and comments from Federal Reserve officials to reassess those expectations.

Gold outlook

We expect that gold will remain in positive territory, supported by buying at lower levels and the pause in the rise of the US dollar and US Treasury yields.

Attention now turns to US economic data and comments from Federal Reserve officials. Further evidence supporting an additional US interest rate hike before the end of the year would put renewed downward pressure on gold prices and risk assets.

SPDR Fund

Gold holdings at the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, increased by around 1.71 metric tons on Wednesday, marking a second consecutive daily increase and lifting total holdings to 1,051.99 metric tons, the highest level since September 4.