Fed Rate Hike Sends Gold Prices Tumbling

The US Federal Reserve has announced a 25 basis-point interest rate hike, as expected. This move brings the Fed Funds Target Range to 3.75%, 4.00%. The decision was met with strong selling pressure for gold, which hit an intraday high of $4,366 before closing at $4,250.

The FOMC statement highlighted that policymakers believe inflation remains elevated, although economic activity in the country expands at a solid pace. Job gains have kept pace with the workforce, and the unemployment rate has changed little.

According to the Summary of Economic Projections (SEP), officials anticipate at least one more rate hike before year-end. Twelve out of 18 officials expect one more 25 bps hike, while four officials expect two hikes. Only two members anticipate no more moves this year.

Chair Kevin Warsh noted that the decision was the 'right' decision, as monetary conditions were not restrictive enough. His hawkish remarks fueled speculation that the US Fed could deliver up to two more interest rate hikes before year-end.