Spot gold and silver fell in U.S. afternoon trading on Wednesday after the Federal Reserve delivered its first rate hike since 2023 and signaled that further tightening could follow. Comments from Fed Chair Kevin Warsh and the latest rate projections pushed the dollar and Treasury yields higher, erasing the precious metals' pre-decision rebound. Spot gold was trading near $4,261.80 an ounce, down 0.72% on the day, while spot silver fell 1.16% to $62.82.
Fed Raises Rates 25 Basis Points as Most Officials See Another Hike
The Federal Reserve lifted its federal funds target range by 25 basis points to 3.75%-4.00%. The updated projections showed that 16 of the 18 officials expect at least one more rate increase before the end of the year. Markets had largely priced in Wednesday's move, but still-elevated inflation and Warsh's remarks at the press conference made it harder for investors to view the decision as a one-off response to the energy-price shock.
The shift in rate expectations was quickly reflected in bond and currency markets. The two-year Treasury yield rose to around 4.734%, while the 10-year yield returned to near 5.00%. The U.S. Dollar Index climbed to 100.25. The rate hike itself was not a surprise for gold, but the dot plot and the Fed chair's comments reinforced the pressure from potentially higher real yields. Thursday's U.S. initial jobless claims, Philadelphia Fed manufacturing index and housing-starts data will provide further clues about whether the economy can absorb tighter monetary policy.
U.S. Stocks Close Lower; European Shares Rise Before the Decision
Major North American equity indexes ended lower after the Fed released its decision and held its press conference. The S&P 500 fell 33.92 points, or 0.4%, to 7,551.81. The Dow Jones Industrial Average dropped 631.21 points, or 1.2%, to 51,461.90. The Nasdaq Composite slipped 3.15 points, less than 0.1%, to 25,978.42, while the Russell 2000 declined 11.47 points, or 0.4%, to 2,858.81.
European markets finished higher ahead of the Fed announcement. The STOXX Europe 600 rose 0.46% to 637.09. The FTSE 100 gained 0.28% to 10,688.47, Germany's DAX advanced 0.61% to 25,558.88, and France's CAC 40 added 0.62% to 8,140.59. Italy's FTSE MIB rose 0.80% to 51,969.12.
Gold Tests $4,257 Support as Silver Falls Below Its Pivot
The relief rally in precious metals before the Fed decision failed to hold. Spot gold fell below the support area around $4,257.42 and remained beneath the latest technical resistance level at $4,313.67. A move back above $4,313.67 would put $4,382.28 in focus, followed by $4,510.93. If gold breaks below $4,257.42, attention would turn to $4,253.63 and then $4,230.51.
Spot silver fell below its $63.3172 pivot after failing to hold the $64.3018 resistance area, moving closer to support at $62.1558. A break back above $64.3018 would bring $65.297 and $65.661 into view. A decline below $62.156 would expose the next support near $60.00. Wednesday's price action indicated that, while the Fed remains in a tightening cycle, movements in the dollar and Treasury yields are temporarily exerting more influence on precious metals than safe-haven demand.
Strait of Hormuz Disruptions Continue to Shape Oil and Inflation Risks
Geopolitical developments continued to affect precious metals through oil prices, inflation expectations and defensive demand. The main market change on Wednesday, however, was not another surge in crude prices but a temporary easing of supply concerns. Saudi Arabia proposed routing additional crude shipments through Oman, reducing some market participants' concerns about a wider disruption to Middle Eastern supplies. At the same time, vessel traffic through the Strait of Hormuz remained restricted as attacks in the region intensified.
Brent crude settled 2.7% lower at $105.83 a barrel, while U.S. West Texas Intermediate crude fell 3.2% to $102.43. The decline in oil prices may ease some immediate inflation pressure, but crude remains above $100 a barrel. Restrictions on Gulf shipping also mean that the risk of higher energy costs spreading through the broader economy has not disappeared. That leaves the Fed watching closely for signs that energy inflation could become more widespread.
Dollar and Treasury Yields Remain the Key Short-Term Drivers
Around Wednesday's close, WTI crude was trading near $102.43 a barrel and Brent near $105.83. The benchmark 10-year U.S. Treasury yield remained close to 5.00%, while the dollar held firm. For gold and silver, the next moves will depend on whether yields retreat, whether the dollar extends its gains and whether incoming economic data supports the Fed's tighter policy stance.
Before rate expectations adjust again, gold needs to reclaim $4,313.67 and silver needs to recover $64.3018 to ease the current downside pressure. If yields continue to rise, the support areas near $4,257.42 for gold and $62.156 for silver will remain key levels for traders to monitor.