At its latest monetary policy meeting, the Federal Reserve announced a 25-basis-point hike in the target range for the federal funds rate, bringing it to 3.75% to 4.00%. Although the market had largely priced in this rate hike, and the latest economic projections suggest the rate could reach 4.1% by year-end—implying at least one more hike this year—the precious metals market initially showed some resilience following the announcement, with spot gold holding steady above $4,300 per ounce.
This support was quickly shattered. During the subsequent press conference, the Fed Chair delivered a more hawkish anti-inflation signal, directly weighing on gold prices. Spot gold plunged to an intraday low of $4,235.01 per ounce, and although the decline narrowed towards the end of the session, it ultimately closed down 0.71%.
In his remarks, the Fed Chair stated bluntly that current inflation remains too high and has persisted for too long, noting that the summer inflation data did not reflect any substantial improvement in the underlying trend. He repeatedly emphasized that the central bank's core mandate remains bringing inflation back down to the 2% target, pointing out that today's rate hike marks the beginning of fulfilling the commitment to price stability. Compared to slowing economic growth, policymakers are currently far more concerned about persistent inflation.
Meanwhile, the yield on the 10-year U.S. Treasury note climbed to its highest level since 2007 this week, briefly breaking through the 5% mark during intraday trading. Responding to this, the Fed Chair noted that the rise in long-term yields is primarily driven by expectations of robust future economic growth, while increased capital expenditures and borrowing by major tech firms have also intensified competition for available funds in the market. Furthermore, global geopolitical tensions have broadly impacted energy and agricultural commodity prices, which ultimately transmitted to the cost of goods for U.S. consumers, further pushing up long-term yields.
Industry analysts point out that stubborn inflation data, strong consumer spending, and solid economic growth make it difficult for the Fed to easily hit the brakes on its tightening path. Although policymakers have maintained flexibility in their communications and avoided explicitly forecasting the exact path for future meetings, historical experience shows that once a rate-hiking cycle begins, it is often followed by consecutive moves. From an asset pricing perspective, a more hawkish anti-inflation stance typically pushes up real interest rates and enhances the appeal of the U.S. dollar, which directly suppresses non-yielding assets such as gold. Coupled with the rising holding costs brought by the 10-year Treasury yield breaking 5%, short-term volatility in the precious metals market has inevitably intensified. Investors will now focus on whether subsequent meetings will maintain the current tightening pace, and how the evolution of inflation and yields will reshape the medium-term trend of gold.
