Gold Rebounds To Near $4,100 As Fed Leaves Interest Rates Unchanged

Gold price (XAU/USD) rebounds to around $4,095 during the early Asian session on Thursday. The precious metal edges higher after the US Federal Reserve (Fed) decided to leave interest rates unchanged, a hold delivered over three dissenting votes and against a fresh eruption of fighting between the US and Iran.

As expected, the Fed left the Federal Funds Rate in its current target range between 3.50% and 3.75% at its July policy meeting on Wednesday. However, the statement showed that three committee members voted for a 25-basis-point rate hike at this meeting.

Fed Chairman Kevin Warsh said during the press conference that tightening in the market has done quite a bit of work for policymakers. He added that the committee will be quick to act if inflation pressures accelerate.

Iran’s Islamic Revolutionary Guard Corps (IRGC) fired ballistic missiles overnight at a US airbase and command center in Jordan, all of them intercepted, per Bloomberg. The US and Saudi Arabia also struck Tehran-backed militias in Iraq, ending a days-long pause in hostilities.

US President Donald Trump said on Wednesday that Washington would strike back at Iran after a recent attack that targeted a military base in Jordan. “We’ll be hitting them hard,” said Trump. “They’re going to get a beating,” he added. Ongoing tensions in the Middle East could push crude oil prices up and prompt central banks to hold rates at elevated levels for longer, weighing on gold's appeal as a non-yielding asset.

Gold outlook supported as Commerzbank questions Fed hike pricing

Analysts at Commerzbank acknowledge the recent weakness in Gold but argue that the downside may be overdone, seeing scope for prices to rebound from here. They stress that “there is potential for the gold price to recover from its current level,” as they “consider current market expectations of Fed rate hikes to be excessive” and instead “anticipate that Fed interest rates will remain unchanged until the end of the year.” In their view, a less aggressive Fed path than currently priced would provide a more supportive backdrop for Gold over the coming quarters.