Gold cuts losses as Fed pauses and stays silent on future hikes

[NEW YORK] Gold erased losses after US Federal Reserve officials left interest rates unchanged and reiterated their commitment to containing inflation without offering a clear signal on whether to tighten monetary policy in December.

Bullion wavered around US$4,050 an ounce as Treasury yields and the US dollar fluctuated.

The Federal Open Market Committee voted 10-2 to hold its benchmark federal funds rate in a range of 3.75 to 4 per cent. Governor Lisa Cook and Cleveland Fed president Beth Hammack dissented, preferring to raise rates by a quarter percentage point.

“The accumulation of more information will help the committee determine the policy stance appropriate to ensure a timely return of inflation to the committee’s 2 per cent goal,” policymakers said on Wednesday (Oct 28) in a post-meeting statement.

It is “a somewhat hawkish hold”, said Bart Melek, global head of commodity strategy at TD Securities.

“As such, we should expect higher rates down the road. But increases will likely be modest as price pressures are not massive, with inflation expectations well-anchored.” 

For gold traders, the Fed decision was less hawkish than it could have been and suggests gold will stay stuck near the bottom of its recent range but should hold above US$3,900 support, he said.

Elevated bond yields act like a double whammy for non-yielding gold, making a major price rebound unlikely anytime soon, Melek added.

Warsh said in a press conference after the decision that the central bank will phase in an adjusted meeting schedule, with plans to hold rate-setting votes at seven out of eight meetings in 2027.

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The change in Fed meeting schedule means less rate certainty. “If the bias is no hike, then low rates remain low longer due to fewer voting meetings, and then the reverse if it’s up,” Melek said. 

The Fed’s rate outlook has largely dictated gold prices in recent months.

Energy-driven inflation has kept bets of further tightening alive, which is typically a headwind for bullion. At the same time, having behaved primarily as a risk asset since the outbreak of the Iran conflict, gold remains vulnerable to broader equity liquidations, as demonstrated by last week’s artificial intelligence-led tech rout.

The precious metal is down 2.1 per cent in October, on course for a second straight monthly loss.

Spot gold rose 0.3 per cent to US$4,070.86 an ounce as at 4.09 pm in New York. Silver slid 0.2 per cent to US$54.32 an ounce while platinum rose and palladium fell. The Bloomberg Dollar Spot Index, a gauge of the US currency, is down 0.1 per cent. BLOOMBERG