Gold prices moved lower on Thursday after investors reassessed Federal Reserve Chair Kevin Warsh’s comments on inflation following the central bank’s decision to leave interest rates unchanged. A stronger U.S. dollar and a rebound in Treasury yields also reduced demand for the precious metal.
At 00:44 ET (04:44 GMT), spot gold (XAU/USD) declined 0.4% to $4,049.99 an ounce after earlier reaching a one-week high of $4,100.42 in the wake of the Fed’s policy announcement. Gold Futures edged up 0.3% to $4,047.20, while silver (XAG/USD) slipped 0.6% to $57.32. Platinum (XPT/USD) dropped 1.3% to $1,597.87.
Early Fed-Driven Rally Loses Momentum
Gold initially advanced after the Federal Reserve opted to keep interest rates unchanged, as weaker Treasury yields and a softer U.S. dollar increased the appeal of non-yielding assets.
However, those gains faded as investors analysed comments from Fed Chair Kevin Warsh, who reaffirmed the central bank’s commitment to bringing inflation back to its long-term 2% target despite leaving monetary policy unchanged.
The U.S. Dollar Index was little changed at around 100.9, while benchmark Treasury yields recovered from the declines seen immediately after the Fed announcement, limiting further gains in bullion prices.
According to CME FedWatch, markets are now pricing in roughly a 64% probability of a September rate increase, down from about 81% before the Federal Reserve’s latest policy decision.
Middle East Conflict Continues to Influence Inflation Expectations
Investors also remained focused on geopolitical developments after the United States launched fresh strikes against Iran overnight. U.S. Central Command described the operation as “a powerful response” to what it said were attempted Iranian attacks on American forces one day earlier.
President Donald Trump had previously pledged retaliation against Tehran, stating that the United States would respond decisively after the military intercepted what it described as a surprise Iranian attack targeting U.S. personnel.
The renewed escalation helped keep oil prices elevated as traders assessed the possibility of additional disruptions to global energy supplies.
Concerns over shipping also increased after the Iran-backed Houthi movement warned it would target Saudi vessels attempting to transit toward the Indian Ocean, prompting some tankers to consider alternative routes.
Firm energy prices have reinforced concerns that inflation could remain persistent, potentially making it more difficult for the Federal Reserve to begin easing monetary policy.
Investors Await Key Inflation Data
Attention now turns to Thursday’s release of the U.S. Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred measure of inflation, which could provide further guidance on the outlook for prices and future interest rate decisions.
Markets will also monitor upcoming policy announcements from the Bank of England and the Bank of Japan later this week, with both central banks widely expected to keep interest rates unchanged.