Gold Prices Plummet After US Federal Reserve Raises Interest Rates

The US Federal Reserve raised interest rates for the first time since July 2023, and gold prices fell in response. The Fed lifted the benchmark federal funds rate to a range of 3.75% to 4.0%. Fed Chair Kevin Warsh expressed concerns over inflation, saying too many categories of products and services showed annualized price gains above 3% on a 6- and 12-month basis.

Warsh signaled further increases in borrowing costs in the coming months, which weighed on gold prices. Higher interest rates typically make non-yielding assets like gold less attractive as investors seek higher returns elsewhere.

Morgan Stanley's chief US economist Michael Gapen noted that if the Fed chair thinks policy is accommodative, then there's more work to do. This hawkish stance from the Fed sent the US Dollar higher and put pressure on gold prices.