Gold Price Slumps After Fed Holds Interest Rates Steady
gold price slumped on Thursday morning ET after the US Federal Reserve left its benchmark rate unchanged and projected only one rate cut for the year, hitting futures and spot benchmarks. The Fed voted in a split decision on Wednesday ET to keep the policy rate in the 3. 5%–3. 75% range, and Fed Chair Jerome Powell flagged heightened uncertainty tied to a spike in oil prices. Surging energy costs linked to conflict between the US, Israel and Iran raised inflation worries that weighed on demand for the non‑yielding metal.
Gold Price reaction and market moves
Market benchmarks showed sharp losses as traders digested the Fed decision on Wednesday ET and subsequent comments. Gold futures slid 4% to $4, 693. 40 per ounce, while spot gold fell by 2. 3% to $4, 714. 24 on Thursday morning ET, reflecting a rapid reassessment of the metal’s appeal in a higher‑for‑longer rate environment. The prospect of interest rates remaining elevated tends to dent the appeal of gold as a non‑yielding asset, and a sharp rise in energy prices is reinforcing that dynamic by stoking inflation concerns and pushing real yields higher.
Immediate reactions from officials and strategists
Fed Chair Jerome Powell, Federal Reserve, described the outlook as clouded by unpredictable shocks from energy markets: “The thing I really want to emphasise is that nobody knows. You know, the economic effects could be bigger, they could be smaller, they could be much smaller or much bigger. We just don’t know. ” He added that a sustained period of much higher gas prices “is going to weigh on consumption, weigh on disposable personal income, and it will weigh on consumption, ” while stressing the uncertainty over whether that outcome will materialize.
Warren Patterson, Head of Commodities Strategy, ING, and Ewa Manthey, Commodities Strategist, ING, said the move in metals was being driven by energy‑linked inflationary pressure: “Gold prices were being pressured by a sharp rise in energy prices, which is raising inflation concerns and reinforcing expectations of a higher‑for‑longer rates backdrop. While geopolitical tensions typically support safe‑haven demand, the inflationary impact of higher energy costs is weighing on gold. It’s pushing real yields higher and capping the upside. ” Their comments link the recent oil shock from the regional conflict to the rapid shift in gold markets.
Quick context
The Federal Reserve left rates unchanged in a split vote on Wednesday ET and reiterated a view of only one rate cut this year while inflation remains a full percentage point above the central bank’s 2% goal. Simultaneous disruptions to oil supply tied to conflict involving the US, Israel and Iran have pushed energy prices higher, complicating the Fed’s outlook and market expectations.
What’s next
Markets will monitor inflation data and energy prices closely in the coming days, with the Federal Reserve’s guidance and any further shifts in oil markets set to influence yields and safe‑haven flows. If energy costs remain elevated and real yields rise, pressure on the gold price could persist; conversely, any swift easing in the regional conflict or oil markets would be watched for a potential rebound in metals demand.
