FOMC Rate Decision: Could the Fed Deepen the Gold Sell-Off?

Gold is edging down towards $4000 while the U.S. dollar holds at a two-week high, with markets awaiting the Federal Reserve's rate decision later today.

With a 90% probability of unchanged rates priced in, markets widely expect the Federal Reserve to maintain its 3.75%–4% range when it announces its decision at 18:00 GMT. Few changes to the policy statement are anticipated, putting the spotlight on the voting split and Fed Chair Kevin Warsh's press conference for indications of how likely a December hike may be.

September's inflation figures provide the backdrop: CPI inflation accelerated to 3.7% year on year, while annual PPI inflation exceeded 6%. Core inflation, however, which excludes more volatile components such as food and fuel, edged up to 2.6%. Although these readings bolster the argument for additional tightening, policymakers have indicated that October will mark a shift away from consecutive hikes, following September's increase of 25 basis points.

Markets' central expectation is a hawkish hold. The question is less whether the Fed will tighten again than how much further it could raise rates over the coming months. In the absence of fresh projections or a dot plot, market moves could hinge on the vote, alongside Kevin Warsh's language and tone.

What could the voting split reveal?

Whether any of the 12 committee members dissent in support of an immediate increase, and how many do so, could offer an indication of the likelihood of a December hike. Markets could view a unanimous decision as a less hawkish hold. By contrast, dissent favouring an increase could send a more hawkish message, making a December rate hike significantly more likely.

Could Kevin Warsh lay the groundwork for a December hike?

Despite generally avoiding forward guidance, Kevin Warsh is expected to reaffirm the need for further tightening. Markets currently assign an 84% probability to a December rate hike and price in two further increases next year, the first of which is fully priced in for April. Reinforcing expectations of a December increase may be the Fed's aim, potentially supporting the U.S. dollar and Treasury yields while weighing on gold.

Risk assets and gold could stage a relief rally, with Treasury yields and the dollar falling, if the Fed refrains from flagging an imminent rate increase. Alternatively, a hawkish hold that offers few surprises could produce a more restrained dollar advance and decline in gold.

A strongly hawkish hold could put gold under pressure as well. Ahead of the Fed meeting, the metal is trading lower and surrendering part of yesterday's 1% gain, as rising oil prices fuel inflation concerns.

High Treasury yields, dollar strength and expectations of interest rates staying higher for longer have prompted analysts to lower their 2026 gold price forecast for the second consecutive quarter. They nevertheless expect gold prices to recover in 2027.

Gold – what does technical analysis indicate?

A bearish outlook persists for gold, which remains beneath its descending trendline, with both the 50 and 200 EMAs also signalling weakness. Following a recent breakdown from $4,100, the price fell to $3,975 before recovering modestly to above $4,030 at the time of writing. That rebound has not altered the bearish technical picture.

For sellers, the aim will be to breach the recent low and move towards the 2026 low of $3,940. A break below that level would shift attention to $3,800.

To recover, gold must first reclaim $4,100, the intersection of the descending trendline and horizontal resistance. The next level in focus would be $4,200, where the 50 EMA sits and which served as key resistance in October. Clearing that level would open the way to the 200 EMA at $4,280, strengthening the price's footing and putting $4,500 in view.

Higher real yields and a stronger dollar following a hawkish Fed decision could deepen gold's bearish technical outlook, with the metal already below its 50 and 200 EMAs. If, instead, the Fed's tone is less hawkish than markets anticipate, dollar weakness could support a recovery in gold towards $4,100.