Gold and silver retreated in late U.S. trading Wednesday after the Federal Reserve delivered its first interest rate increase since 2023 and signaled additional tightening may lie ahead, pushing the dollar and Treasury yields higher. While the widely expected hike was fully priced into markets, updated rate projections from policymakers took a more hawkish tilt. Still, market analysts characterized the pressure on precious metals as a short-term phenomenon, with gold’s long-term supporting fundamentals largely intact.
The Federal Open Market Committee voted 12-0 to lift its benchmark federal funds rate by 25 basis points to a target range of 3.75% to 4%. In its official statement, the Fed said U.S. economic activity is expanding at a solid pace, with resilient domestic spending, strong productivity growth and robust capital investment, while job gains have kept pace with the workforce and the unemployment rate has been little changed. It noted inflation remains elevated and said the move would support a timelier return to the central bank’s 2% inflation goal. The statement offered no explicit forward guidance on the future path of policy. Ahead of the decision, markets had priced in a more than 90% chance of a 25-basis-point hike, and roughly an 80% probability of a second increase before year-end, according to the CME FedWatch Tool.
Updated quarterly Summary of Economic Projections (SEP), widely known as the dot plot, showed 16 of 18 participating officials see at least one more 25-basis-point rate hike as appropriate in 2026, up from just six who held that view at the June meeting, marking a sharp shift toward tighter policy. Fed Chair Kevin Warsh said inflation remains too high, and markets broadly interpreted the decision as the start of a new sustained tightening cycle rather than a one-off response to oil-driven price pressures. Following the announcement, Treasury yields climbed across the curve: the 2-year yield rose to about 4.734%, while the 10-year yield moved back to 5.00%. The U.S. dollar index advanced to 100.25.
Precious metals gave up their pre-Fed relief bounce and turned lower in late-afternoon trading amid the hawkish signals. Spot gold was trading near $4,261.80 an ounce, down 0.72% on the session, while spot silver stood at $62.82 an ounce, a 1.16% daily decline. Technically, gold has pulled back toward support around $4,257.42 an ounce and remains below resistance at $4,313.67 an ounce. Silver broke below its pivot level of $63.3172 an ounce and is testing support near $62.1558 an ounce, after failing to hold above resistance at $64.3018 an ounce. Price action shows that during active Fed tightening, moves in the dollar and Treasury yields outweigh safe-haven demand as drivers of precious metals. Without a meaningful pullback in yields, gold’s near-term path will likely remain tilted toward testing lower support levels.
In a recent note on precious metals, Alex Kuptsikevich, Chief Market Analyst at FxPro, said the rate hike is imposing mostly short-term sentiment pressure on gold, with limited long-term impact. He argued that the base case scenario — a Fed tightening cycle with the possibility of another hike this year — should stabilize the U.S. dollar and ease concerns about runaway long-term inflation, in turn capping longer-dated Treasury yields. Such an environment is not outright bearish for gold, he added.
Looking further out, Kuptsikevich said gold’s medium- to long-term outlook remains positive, with the U.S. dollar as the core driver. Over the past three weeks, a stronger greenback and rising Treasury yields have weighed on the non-interest-bearing metal, but every pullback in the dollar has quickly triggered a rebound in gold prices.
He also noted that a rate hike may not be a long-term positive for the dollar, and could instead stoke geopolitical uncertainty. Discontent with Fed policy is growing in the White House, U.S. fiscal problems remain unresolved, and Treasury intervention in currency and debt markets is boosting demand for decentralized assets. Against that backdrop, the pullback in gold prices sparked by the start of the Fed’s hiking cycle could create a long-term buying opportunity for the metal.
The broader market consensus holds that higher interest rates will put pressure on gold prices in the near term. But once prices adjust lower, gold’s long-term value as a portfolio allocation will reemerge.
