Gold Prices Steady After Fed Keeps Interest Rates Unchanged

Gold prices held steady after the US Federal Reserve kept interest rates unchanged despite rising inflationary risks from the escalating war in the Middle East. The Fed voted 9-3 in favor of holding rates, with some policymakers signaling that higher borrowing costs may still be needed to curb resurgent price pressures.

Fed Chairman Kevin Warsh insisted that the decision wasn't a sign of inertia at the US central bank, and that interest rates could be part of the solution if inflation continues to be elevated. Traders scaled back bets on immediate rate hikes, pushing down yields on short-term Treasuries and reducing the opportunity cost of holding gold.

Gold is down by nearly a quarter since the US-Iran war began more than five months ago, with high energy prices stoking inflationary pressures and raising the likelihood that rates will stay higher for longer. However, a wave of dip-buying has supported bullion at the key level of $4,000 an ounce in recent weeks.

Nicky Shiels, head of research and metals strategy at MKS PAMP SA, noted that 'overly shorted or disliked asset classes like precious metals and bonds' can expect relief rallies following the Fed's decision. She added that $4,200 is a key inflection point for gold.