Gold Rebounds from Sell-Off But Hawkish Fed Outlook Caps Gains

Gold prices have recovered from an earlier sell-off triggered by the Federal Reserve's interest rate hike, but the precious metal's gains are capped due to a hawkish outlook.

The US Dollar Index (DXY) retreated from its highest level since July 31, while the benchmark 10-year US Treasury yield fell below 5.04%, which was touched earlier this week.

However, the prospect of further rate hikes by the Fed keeps the upside capped for gold. The updated dot plot shows that 16 out of 18 policymakers expect at least one more quarter-point increase by the end of the year, while the median projection points to a policy rate of 4.1%.

Fed Chairman Kevin Warsh also struck a hawkish tone, saying inflation is too high and describing the hike as removing 'a dose of accommodation', which suggests that the Fed may be prepared to raise rates again in the coming months.