Gold prices reversed course to fall over 1% after the U.S. Federal Reserve hiked its benchmark overnight interest rate by a quarter of a percentage point, bringing it to the 3.75%-4.00% range. This decision was unanimous among FOMC members, including Chair Kevin Warsh, and signals further increases in borrowing costs in the coming months. The dollar strengthened following the announcement, making gold more expensive for international buyers and reducing the appeal of the non-yielding metal.
Spot gold was down 1.2% at $4,240.1 per ounce, after having previously climbed more than 1% to a session high of $4,365.57. U.S. gold futures for December delivery settled 1.3% higher at $4,387.50. Other precious metals also saw declines, with spot silver falling 1.7% to $62.57 per ounce, platinum declining 2.3% to $1,735.33, and palladium shedding 1.5% to reach $1,269.95.
The Fed's hawkish stance, with 16 of 18 policymakers expecting an additional quarter-point rate hike in 2026, reinforced the view that more increases are coming. This was echoed by Chair Kevin Warsh, who emphasized the Fed's commitment to price stability due to persistent high inflation, exacerbated by factors like global import tariffs, an energy shock from the U.S.-Israeli war with Iran, and capital spending from the AI boom. Analysts, such as Tai Wong, noted that Warsh's comments, combined with a hawkish dot plot, are supportive of the dollar and will pressure metals in the short term. Jeffrey Roach, Chief Economist at LPL Financial, described the Fed's position as more hawkish than anticipated, suggesting that another hike may be imminent if economic activity remains strong.
