Gold Slides as Fed Holds Rates But Dot Plot Reveals Sharp Hawkish Split

Gold (XAU/USD) declined as the Federal Reserve kept its benchmark rate steady at 3.50%–3.75% on Wednesday, in new Chair Kevin Warsh's first policy decision at the helm. The metal swung volatilely within a $4,280–$4,330 range as markets digested the announcement.

A Notable Shift: No More Forward Guidance

In a departure from recent practice, the Fed removed forward guidance language from its statement entirely — a change market watchers are linking to Warsh's first lead on monetary policy, with some speculation that he deliberately chose not to provide directional guidance in the dot plot. The Fed acknowledged the economy is "expanding solidly" despite uncertainty tied to the Middle East conflict, with the unemployment rate little changed. On inflation, the Committee stated that price pressures remain elevated relative to its 2% goal, "in part reflecting supply shocks that have driven price increases in certain sectors, including energy," while reaffirming it "will deliver price stability."

The Numbers Behind the Hawkish Tilt

The Summary of Economic Projections is where the real signal lies. The median dot now shows the Fed Funds Rate ending the year at 3.8%, a meaningful jump from March's 3.4% median projection. Policymakers also project the economy growing 2.2% by the end of 2026, while Core PCE — the Fed's preferred inflation gauge — is seen at 3.3%, fully 1.3 percentage points above the 2% target.

That upward revision in the rate projection is the key reason gold sold off: half of FOMC members now expect rates above 3.75% by year-end, while the rest favor holding steady — a split that itself signals genuine disagreement within the committee, not a unified dovish or hawkish consensus. For gold, which pays no yield, this raises the probability-weighted cost of holding the metal even though no rate hike has actually occurred yet.

Why the "No Guidance" Decision Matters

Removing forward guidance under a new Chair adds a layer of uncertainty beyond the dot plot itself: traders can no longer rely on explicit Fed language to anticipate the path ahead, meaning each future data release — particularly inflation prints — is likely to trigger sharper market reactions than under the previous, more predictable guidance framework.

Why This Matters for Southeast Asian Traders

A higher-for-longer rate path strengthens the Dollar's relative appeal, which typically pressures regional currencies such as the Thai baht, Indonesian rupiah, and Malaysian ringgit, and raises the opportunity cost of holding non-yielding assets like gold across ASEAN markets, where physical gold demand remains culturally significant. Combined with separate developments around the US-Iran peace deal — which could undermine the Dollar's safe-haven appeal — gold's near-term direction will likely depend on which force, Fed hawkishness or geopolitical de-escalation, dominates the narrative in coming sessions.

What to Watch

Incoming US inflation data that could validate or undercut the SEP's 3.3% Core PCE projection, any clarifying remarks from Warsh on the decision to remove forward guidance, and developments in the Iran peace deal that could offset the Dollar-supportive effect of Wednesday's dot plot.

Source: Federal Reserve.

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