Gold Slips Toward $4,000 After Fed Hold as Markets Still Price a December Rate Hike

Since the Federal Reserve held rates at 3.75% to 4% on Wednesday, Oct. 28, gold has slid back toward the $4,000 line. Spot gold fell between 0.7% and 1% in Asian trading today, Oct. 29, to roughly $4,038 to $4,044 an ounce. Spot silver dropped about 1% to below $53.50.

The retreat followed three sessions of modest gains. Dealers describe those gains as tentative.

The Fed gave gold no relief

The Federal Open Market Committee voted 10-2 to hold. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented. Both wanted an immediate quarter-point hike.

It was Cook's first dissent since she joined the board in 2022 as a Biden appointee.

The FOMC statement said "economic activity is expanding at a strong pace." It also said domestic spending has been resilient and productivity growth is strong. Gold pays no interest, and that is not a backdrop that favors it.

Chair Kevin Warsh offered little guidance on December. Markets now price roughly a 78% chance of a hike at that meeting, down from 84% before the announcement. Even at 78%, a hike remains the market's base case.

Dutch bank ING has penciled in a quarter-point increase in December, followed by a pause through December 2027. In an Oct. 23 research note, ING said that forecast assumes a post-midterm deal that improves energy flows from the Persian Gulf and sharply cuts shipping and insurance costs.

Oil is the inflation driver

Brent crude was near $114 a barrel today, off four-year highs but up more than 17% in October. WTI sat near $101.50. The moves tie to clashes between Saudi Arabia and Iran-backed Houthi forces and threats to shipping through the Strait of Hormuz.

That is the awkward part for gold. A Middle East conflict would normally pull in safe-haven buyers. Instead it has pushed up energy costs, kept inflation alive and strengthened the case for higher rates.

There was a diplomatic angle today. Reports indicated Vice President JD Vance had contacted Iranian national security official Mohsen Rezaei. President Trump confirmed that talks were underway through mediators but said the outcome was uncertain. Crude slipped about 1% on the news.

Gold did not rally with it.

Where the Fed and Treasury disagree

The Fed's own members are split on how much of this inflation will last. Treasury Secretary Scott Bessent said in a CNBC interview Wednesday that Fed officials "should have an open mind in terms of the transitory nature of the supply shock." His argument is that energy costs drive the current price surge and could prove temporary.

Cook and Hammack voted the other way. The last time the committee held rates this past summer, Dallas Fed President Lorie Logan and Minneapolis Fed President Neel Kashkari dissented alongside Hammack. That makes four different officials who have preferred a hike across the last two decisions.

The committee also made a structural announcement. Warsh said the Fed will hold seven rate decisions next year and six the year after, down from eight. The remaining meetings will become strategy sessions without rate votes. He said the change takes effect next fall and is meant to leave more room for "strategic deliberations." The Fed can still call an emergency rate meeting if needed.

Warsh also addressed the midterms, which are days away. "I didn't hear a reference to politics, elections, what's happening in the next week or so," he said of the two-day meeting.

The levels traders are watching

The 10-year Treasury yield held above 5% after the decision, and the 30-year was near 5.33%. The two-year, which tracks Fed expectations, rose to about 4.78%. The dollar index was flat near 102.30. A firmer dollar was the immediate pressure on bullion today.

Spot gold hit a recent weekly low of $3,978.18 this week before bouncing. Analysts treat $4,000 as the psychological line. The next hurdle on the upside is about $4,030 to $4,066.

StoneX has flagged a support zone near $3,942. It warned that a break below it could expose $3,895.

Thursday's US inflation data may decide the next move. Tony Sage of Critical Metals told The Wall Street Journal that softer inflation and growth readings could ease yields and support gold. Stronger figures could lift the dollar and prolong the decline.

The Fed's preferred inflation gauge, the PCE price index, is also on investors' calendars. The next FOMC decision is in December, and that is when the hike the market expects either arrives or does not.