FOMC Rate Decision: Gold at Risk of a Steeper Fed-Driven Sell-Off

$4000 is approaching as gold edges lower. The U.S. dollar holds at a two-week high before the Federal Reserve delivers its rate decision later today.

Markets assign a 90% probability to unchanged interest rates when the Federal Reserve announces its decision at 18:00 GMT. The widely anticipated outcome would keep the policy range at 3.75%–4%. With few amendments expected in the policy statement, attention centres on the voting split and Fed Chair Kevin Warsh's press conference for signals on the likelihood of a December hike.

September inflation readings frame the decision: CPI accelerated to 3.7% year on year, while annual PPI exceeded 6%. The rise in core inflation, which excludes more volatile items such as food and fuel, was modest at 2.6%. Although the figures strengthen the case for further tightening, policymakers have signalled a break from consecutive hikes in October after raising rates by 25 basis points in September.

How far rates could climb over the coming months, rather than whether the Fed will tighten again, is the market's main consideration. A hawkish hold remains the baseline expectation. Without updated projections or a dot plot, the vote and Kevin Warsh's wording and tone could determine the market response.

12 Votes: Dissent Could Signal December Intent

December hike expectations could depend on whether any of the 12 committee members vote for an immediate increase, and the number who do so. Markets might interpret an absence of dissent as a less hawkish hold. Votes favouring a hike could instead signal a more hawkish position, making a December increase significantly more likely.

84% December Hike Probability: Kevin Warsh in Focus

A December rate hike carries an 84% probability in market pricing. Two additional hikes are priced in for next year, with the first fully reflected for April. Kevin Warsh is expected to repeat that further tightening is warranted, despite his usual reluctance to offer forward guidance. Reinforcing December hike expectations may be the Fed's objective, with potential gains for the U.S. dollar and Treasury yields at gold's expense.

Risk assets and gold could benefit from a relief rally if the Fed stops short of signalling an imminent hike, while Treasury yields and the dollar could decline. By comparison, a largely unsurprising hawkish hold could leave the dollar with a smaller gain and gold with a more modest loss.

An emphatically hawkish hold could likewise weigh on gold. With higher oil prices fuelling inflation fears, the metal is declining before the Fed meeting and reversing part of yesterday's 1% increase.

Elevated Treasury yields, dollar strength and expectations that rates will stay higher for longer have led analysts to reduce their 2026 gold price forecast for a second successive quarter. Their outlook nevertheless includes a recovery in gold prices in 2027.

$4,100 Resistance: Gold Technical Outlook

Gold's recent slide from $4,100 reached a low of $3,975. A small rebound has since lifted the price above $4,030 at the time of writing, but has not reversed the bearish picture. The metal remains under its falling trendline, while the 50 and 200 EMAs both point to weakness.

Taking out the recent low would allow sellers to target $3,940, the 2026 low. Beneath that level, attention would shift to $3,800.

Reclaiming $4,100 is the initial hurdle for any recovery, as horizontal resistance and the falling trendline meet there. The next focus would be $4,200, home to the 50 EMA and a key resistance level in October. A move beyond it would expose the 200 EMA at $4,280, establish a firmer footing for the price and bring $4,500 into view.

A hawkish Fed could lift real yields and strengthen the dollar, reinforcing gold's bearish technical picture while it trades below both its 50 and 200 EMAs. A message less hawkish than markets expect could have the opposite effect: dollar weakness could help gold recover towards $4,100.