Precious Metals Aftermath: Fed Holds Steady, Dollar Weakens, Spot Gold Price Rebounds 2%

Gold prices climbed Wednesday, with spot gold briefly dipping below the $4,000 level in early trading before rebounding 2% following the Federal Reserve's decision to hold rates steady and the subsequent weakening of the U.S. dollar.

At 2:55 p.m. Eastern Time, shortly after the Fed's announcement, spot gold rose 1.9% to $4,101.99 per ounce, reaching an intraday high of $4,116.26—the highest since July 23.

August-delivery gold futures closed down approximately 0.1% at $4,036.30 per ounce.

The Fed decided to maintain the federal funds rate in the 3.50–3.75% range, a move that intensified scrutiny over Chair Jerome Powell's strategy to bring inflation back to the 2% long-term target.

Following the decision, the dollar weakened against the euro, making dollar-denominated gold cheaper for overseas buyers. Meanwhile, the 10-year U.S. Treasury yield retreated slightly from earlier highs.

Tai Wong, an independent metals trader, said: "Even though Powell's overall tone sounded hawkish, precious metals led the rally. It feels like a relief rally after the Fed held rates steady. It's unclear how long this momentum will last. Powell's wording was nuanced, so the market may reassess its view after deeper analysis."

Despite persistently high U.S. inflation data, the Fed chose to hold rates steady. In his post-meeting press conference, Powell emphasized that the Fed does not have a higher 'soft inflation target' and remains committed to achieving the 2% long-term goal.

Wong highlighted gold's inflation-hedging properties, stating: "The long end of the bond market panicked, dragging equities lower in the end. Fear of inflation gave gold a standout performance."

According to the CME's FedWatch tool, traders now assign a 64% probability of a rate hike in September, down from 81% before the statement was released.

Investors are awaiting the release of the June Personal Consumption Expenditures (PCE) price index for further clues on the potential direction of monetary policy.

Meanwhile, the Bank of England (BOE) and the Bank of Japan (BOJ) are also set to announce their policy decisions this week. Markets expect both central banks to hold rates steady but issue warnings about inflationary pressures stemming from the Middle East conflict.

Other precious metals:

- Spot silver rose 3.2% to $58.96 per ounce - Spot platinum gained 1.9% to $1,636.10 per ounce - Spot palladium increased 1% to $1,281.75 per ounce