FOMC Rate Decision: Fed Could Intensify Selling Pressure on Gold

At a two-week high, the U.S. dollar remains firm ahead of today's Federal Reserve rate decision, while gold is retreating towards $4000.

A 90% probability of unchanged rates is priced into markets ahead of the Federal Reserve's announcement at 18:00 GMT, with the policy range widely expected to stay at 3.75%–4%. As little revision to the policy statement is anticipated, investors will scrutinise the voting breakdown and Fed Chair Kevin Warsh's press conference for signs of the likelihood of a December increase.

September's CPI inflation rose to 3.7% year on year, and annual PPI inflation stood above 6%, forming the backdrop to the meeting. The increase in core inflation was more modest, reaching 2.6%; this measure excludes more volatile items such as food and fuel. These figures support the argument for further tightening. Nevertheless, after September's 25 basis points increase, policymakers have indicated that October will bring a departure from successive rate rises.

Rather than questioning whether further tightening lies ahead, markets are weighing the extent of potential rate increases over the coming months, with a hawkish hold the central scenario. Neither fresh projections nor a dot plot will be available, leaving the voting outcome and Kevin Warsh's choice of words and tone as potential drivers of the market response.

Voting divisions could shape December rate expectations

An indication of December's prospects could come from the number of dissenters among the 12 committee members, if any favour an immediate rate rise. A decision without dissent might be read as a less hawkish hold. Dissenting votes for an increase, however, could convey a more hawkish stance and make a December rise significantly more likely.

Kevin Warsh faces focus on December tightening signals

An 84% probability of a December rate increase is reflected in market pricing, alongside two further rises next year, with the first fully priced in for April. Although Kevin Warsh tends to avoid forward guidance, expectations are that he will again argue that further tightening is warranted. By bolstering expectations for a December increase, the Fed could support the U.S. dollar and Treasury yields, to gold's detriment.

A relief rally in risk assets and gold, accompanied by lower Treasury yields and a weaker dollar, could result if the Fed gives no indication that a rate rise is imminent. If the outcome is instead a hawkish hold with little to surprise markets, the dollar's gains and gold's losses could be more limited.

Gold could also face pressure from a pronounced hawkish hold. Ahead of the meeting, the metal is paring yesterday's 1% advance, trading lower as oil price increases heighten concerns about inflation.

For a second consecutive quarter, analysts have reduced their 2026 gold price forecast, citing elevated Treasury yields, U.S. dollar strength and expectations of rates remaining higher for longer. A recovery in gold prices is nonetheless expected in 2027.

Gold remains under technical pressure

Both the 50 and 200 EMAs indicate a bearish outlook, while gold remains below its downward trendline. After breaking lower from $4,100, the price reached $3,975 before a modest recovery took it above $4,030 at the time of writing. This rebound has left the bearish outlook unchanged.

A breach of the recent low will be the sellers' objective, with the 2026 low at $3,940 their next target. Further losses would bring $3,800 into view.

The first requirement for a recovery is a move back above $4,100, the point where horizontal resistance meets the falling trendline. Attention would then shift to $4,200, which marks the 50 EMA and was an important resistance level in October. Beyond that, the 200 EMA at $4,280 would become the next target; clearing this would give the price a stronger footing and put $4,500 in sight.

Higher real yields and dollar strength could compound gold's bearish technical position if the Fed proves hawkish, given that the metal is already below its 50 and 200 EMAs. A less hawkish message than markets anticipate could instead weaken the dollar, helping gold regain ground towards $4,100.