Fed Hawkishness and Record Yields Weigh on Gold Prices

The Federal Reserve's decision to hold interest rates steady sparked a hawkish tone, leading investors to reassess their outlook for further tightening. Spot gold and silver prices pared their post-Fed rally, but remained resilient at $4079 per ounce and $58.09, respectively.

However, the surge in long-term Treasury yields reached a 19-year high of 5.2% on Thursday, extending the upward trend triggered by Wednesday's Fed decision. Analysts warn that this could be a point of worry, as it may indicate the Fed's lack of credibility and potential for further tightening.

Nicky Shiels, head of metals strategy at MKS Pamp, expects relief rallies in overly shorted assets such as precious metals until the September FOMC meeting or Jackson Hole at the end of August. Historically, gold has not declined once a tightening cycle begins, and may even move higher after initial weakness.