Gold prices retreated on Thursday as investors reassessed the Federal Reserve's inflation outlook following the central bank's decision to keep interest rates unchanged. A stronger US dollar and a rebound in US Treasury yields also pressured the precious metal, limiting its recent gains.
As of 11:44 WIB, XAU/USD fell 0.4% to $4,049.99 per ounce, after earlier climbing to a one-week high of $4,100.42 in the aftermath of the Fed's policy announcement. Meanwhile, Gold Futures edged up 0.3% to $4,047.20, silver (XAG/USD) declined 0.6% to $57.32, and platinum (XPT/USD) dropped 1.3% to $1,597.87.
Gold Rally Loses Momentum After Fed Holds Rates Steady
Gold initially rallied after the Federal Reserve left interest rates unchanged, as declining US Treasury yields and a weaker US Dollar Index boosted demand for the non-yielding precious metal.
However, the rally quickly lost steam after investors digested comments from Fed Chair Kevin Warsh, who reiterated the central bank's commitment to bringing inflation back to its long-term 2% target despite maintaining its current monetary policy stance.
The US Dollar Index (DXY) was last trading near 100.9, while benchmark Treasury yields recovered from their post-decision lows, reducing the upside potential for gold.
According to the CME FedWatch Tool, markets are now pricing in approximately a 64% probability of a September interest rate hike, down from around 81% before the Fed's policy announcement, reflecting a notable shift in market expectations.
Middle East Tensions Keep Inflation Risks Elevated
Geopolitical tensions also remained in focus after the United States launched fresh strikes against Iran overnight. US Central Command described the operation as a "strong response" to what it called an attempted Iranian attack on American forces the previous day.
Earlier, President Donald Trump vowed to retaliate against Tehran, stating that the United States would respond decisively after the military intercepted what he described as a surprise Iranian attack targeting US troops.
The renewed escalation has kept oil prices elevated as traders assess the risk of further disruptions to global energy supplies. Shipping concerns have also intensified after the Iran-backed Houthi group warned it would target Saudi vessels attempting to reach the Indian Ocean, prompting several oil tankers to seek alternative routes.
Persistent strength in energy markets has reinforced concerns that inflation could remain elevated for longer, complicating the Federal Reserve's path toward future monetary policy easing.
US PCE Inflation Data in Focus
Investors are now awaiting the release of the US Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's preferred inflation gauge, for fresh clues on inflation trends and the future direction of interest rates.
Market attention will also shift to upcoming monetary policy decisions from the Bank of England (BoE) and the Bank of Japan (BoJ) later this week, with both central banks widely expected to leave their benchmark interest rates unchanged.