Gold Price Rebound Fades Amid Hawkish Fed and Rising US Dollar
The gold price rebound appears to be short-lived as the market digests the Fed's hawkish monetary policy announcements. The XAU/USD pair has stalled its recovery from six-week lows of $4,235 reached after the Fed raised interest rates by 25 basis points (bps) to 3.75%-4%. The Fed's Summary of Economic Projections suggests another rate hike this year and a muddy outlook for next year, while four participants predict rate cuts in 2027.
Fed Chair Kevin Warsh emphasized that the action will support a timelier return to its 2% inflation goal, hinting subtly that disinflation remains intact. This affects the market's view of the Fed's path forward on rates, with traders digesting the overnight central bank event and stalling the US Dollar (USD) rally to seven-week highs across the board amid a pullback in US Treasury bond yields from multi-year peaks.
The gold price also draws some support from the overnight retreat in Oil prices, which eases inflation fears. However, the focus now shifts to the Bank of Japan's (BoJ) monetary policy decision on Friday, which could significantly impact the USD/JPY pair and have a spillover effect on the Greenback and Gold.