Fed Rate Hike Sparks Gold Rally Amid Oil Price Drop

Gold prices rose over one percent on Thursday as investors digested the US Federal Reserve's interest rate hike and its signal that further policy tightening may follow. Spot gold was up 1.1 percent at $4,310.49 per ounce, after hitting a near six-week low on Wednesday.

The Fed raised interest rates on Wednesday and flagged more hikes in the coming months, with new US central bank chief Kevin Warsh joining a unanimous decision that acknowledges the Trump administration's inability so far to control inflation. 16 of 18 policymakers anticipate at least one more quarter-percentage-point hike by the end of this year.

Oil prices fell, extending losses from the previous session, as reports of Saudi Arabia offering extra crude cargoes through Oman reduced fears of supply disruptions. However, gold's uptick is largely driven by technical factors, with the Fed's hawkish message already largely priced into the market, according to Kelvin Wong, senior market analyst at OANDA.

The current uptick in gold may be short-lived as higher rates reduce its appeal by boosting the attractiveness of interest-bearing assets. Nevertheless, investors are watching for any hint that higher energy prices could force the Bank of England to follow the Fed's example.