Gold Under Pressure, Fed Dissent Raises “Higher-for-Longer” Narrative
Gold prices remained stuck in a three-day downtrend after the Federal Reserve kept interest rates unchanged but signaled a more hawkish stance amid uncertainty over the Iran war. Bullion hovered around $4,550 per ounce in early trading, having fallen 3.4% in the past three sessions.
The Fed's decision to hold rates on hold on Wednesday was in line with expectations, but was accompanied by hawkish dissent from some policymakers. Several officials rejected language in the statement that suggested the central bank would eventually cut rates again, accentuating internal divisions amid the risk of resurgent inflation.
The bond market responded with sharp losses. Treasuries took a hit, and the 2-year yield posted its biggest daily gain on a Fed decision day since 2022, as market participants increased bets that the Fed could need to raise borrowing costs again if inflationary pressures persist. This weighed on non-yielding gold.
The 8-4 vote marked the first time since 1992 that four dissenters had voted against the FOMC decision, indicating widening differences of opinion due to growing economic uncertainty stemming from the war, which is entering its ninth week. Nicky Shiels of MKS PAMP believes the narrative of stagflation and high interest rates is back in focus, and the prospect of a rate hike is still underpriced by the gold market.
Pressure on gold also comes from the energy sector. The prolonged conflict has driven energy prices soar, while progress on US-Iran talks has stalled and energy shipments through the Strait of Hormuz are said to be virtually zero. Gold is headed for its second monthly decline in April and has fallen about 14% since the war began in late February. On the geopolitical front, President Donald Trump confirmed the US will continue its naval blockade of Iranian ports, while Brent closed above $118 per barrel, its highest since June 2022.
5 key points:
- Gold held near $4,550/oz after falling 3.4% in three sessions and is in a three-day downtrend.
- The Fed held interest rates, but hawkish dissenters rejected the "cut ahead" signal, reinforcing the higher-for-longer tone.
- Treasuries took a hit; the 2-year yield rose sharply, as markets began to price in the risk of a rate hike if inflation persists.
- The 8-4 vote (four dissenters) was the most divided since 1992, highlighting the uncertainty caused by the Iran war.
- Energy prices surged and Hormuz flows were nearly zero; gold fell about 14% since the war began, Brent closed >$118.asd)(asd)*
Source: Newsmaker.id
