Gold prices fell to $4,277.6 per ounce after the Federal Reserve's first policy meeting under Chairman Kevin Warsh. The Fed maintained its benchmark interest rate between 3.50% and 3.75%, but updated economic projections indicated a possible 25 basis point hike, raising the estimated year-end rate to 3.8%. This hawkish outlook largely overshadowed earlier market optimism stemming from a tentative US-Iran peace deal that had previously pushed gold higher.
The initial rise in gold was triggered by news of a US-Iran peace accord, which included provisions for Iran to resume oil exports and extended a ceasefire. This development lowered oil prices and eased inflation concerns, leading traders to reduce bets on a December Fed rate hike from 70% to 58%. The weaker dollar, also a result of the peace deal, made gold more affordable for international buyers, further supporting its price.
However, the Federal Reserve's stance quickly shifted market sentiment. Policymakers removed language from their statement that had previously signaled further rate cuts, signaling an end to monetary easing. The revised "dot plot" showed that nine out of nineteen Fed officials now anticipate a rate hike in 2026, a significant change from earlier projections. This hawkish turn, influenced by persistent geopolitical tensions and the threat of energy-induced inflation, led to gold's decline despite the Middle East peace efforts.
