Gold price (XAU/USD) tumbles to around $4,280 during the early Asian session on Thursday. The precious metal faces some selling pressure after the US Federal Reserve (Fed) decided to hold its benchmark interest rate steady but signaled a hike in borrowing costs later this year.
The Federal Open Market Committee (FOMC) on Wednesday voted unanimously to hold its benchmark federal funds rate in a range of 3.5% to 3.75% in its first gathering under Kevin Warsh’s leadership.
New Fed Chairman Kevin Warsh vowed to restore price stability following his first policy meeting since taking the helm of the US central bank after officials left interest rates unchanged and hinted at growing support for rate hikes this year. It’s worth noting that Gold is often used as a hedge against inflation but does not yield interest, making it less attractive when interest rates are high.
Markets now see a 83.1% chance of a rate hike in December this year, jumping from 61% before the Fed decision, according to the CME FedWatch Tool.
On the geopolitical front, Iran and the US are expected to formally sign a memorandum of understanding to end the war on Friday in Geneva. According to the agreement, Tehran will allow commercial ships to pass safely and without paying tolls for 60 days under the terms of the MOU. Iran will then “conduct a dialogue” with Oman to define the future administration and maritime services in Hormuz in discussion with the other Gulf states.
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