Gold falls more than 1% after Fed hikes interest rates

Gold prices reversed course to fall over 1% on Wednesday after the U.S. Federal Reserve raised interest rates and flagged further increases in borrowing costs in the coming months, sending the dollar higher and hurting non-yielding bullion.

Spot gold was down 1.2% at $4,240.1 per ounce as of 3:10 p.m. ET (1910 GMT), after having climbed more than 1% to a session high of $4,365.57 earlier. U.S. gold futures for December delivery settled 1.3% higher at $4,387.50.

The Fed raised the benchmark overnight interest rate by a quarter of a percentage point to the 3.75%-4.00% range, with chief Kevin Warsh joining a unanimous decision that effectively acknowledges the Trump administration’s inability so far to control inflation.

Also Read: A 25 bps hike: US Federal Reserve raises interest rates for first time since 2023Speaking after the decision, Warsh echoed the official statement by promising the Fed’s policy committee would “deliver price stability.”

“Warsh’s comments are being read as hawkish on top of a hawkish dot plot, which reinforces the view that there will be additional hikes in the upcoming meetings. That is helping the dollar and will pressure metals in the short-term,” said independent metals trader Tai Wong.The dollar rose against the euro after the Fed’s announcement, making gold more expensive for overseas buyers.
The combined impact of U.S. President Donald Trump’s global import tariffs, an energy shock following the start of the U.S.-Israeli war with Iran and capital spending from the AI boom has kept prices elevated, forcing the central bank to increase rates.
“Our predominant focus is on the price stability side of our mandate. Plain fact is that inflation is too high, and has been for too long. This summer’s inflation readings do not tell me that underlying trends have meaningfully improved,” Warsh said.

Also Read: US Fed chair Kevin Warsh explains why the Federal Reserve raised interest rates

While gold is traditionally viewed as a hedge against inflation, higher rates reduce the non-yielding metal’s appeal.

Meanwhile, Brent crude retreated after reports of additional Saudi crude cargoes via Oman eased Middle East supply concerns, while a smaller-than-expected U.S. crude draw added pressure.

Spot silver fell 1.7% to $62.57 per ounce, platinum declined 2.3% to $1,735.33 and palladium shed 1.5% to reach $1,269.95.