Spot gold set to snap three-day losing streak a day after Fed’s rate hike

Gold spot prices climbed on Thursday and were set to snap a three-session losing run, a day after the Federal Reserve delivered its first interest rate hike in over three years. Bullion was supported by the dollar halting its rally and an extended decline in oil prices.

At 15:50 ET (19:50 GMT), spot gold advanced 1.9% to $4,346.62/oz, while gold futures were down 0.1% to $4,385.17/oz.
Fed lives up to market expectations, raises rates
Spot gold dropped 1.8% over the last three sessions, as odds for a Fed hike mounted. The Federal Open Market Committee (FOMC) on Wednesday did not disappoint, unanimously voting to raise the federal funds rate to 3.75%-4.00% from 3.50%-3.75%. Higher rate environments tend to weigh on gold. They also tend to strengthen the dollar, which in turn can make bullion more expensive for foreign buyers.

Precious metal market participants also digested hawkish indicators from both the updated Summary of Economic Projections and Fed Chair Kevin Warsh’s press conference. The new dot plot showed at least 12 FOMC members seeing one more rate hike this year.

Warsh, for his part, highlighted a lack of meaningful improvement in underlying U.S. inflation trends, noted that broader financial conditions were not restrictive enough, and re-asserted the central bank’s commitment to deliver price stability.

“The plain fact is that inflation is too high and has been for too long,” Warsh told reporters.

As per the CME FedWatch tool, another quarter-point rate hike in October remains a toss up, with odds of such a move standing at 55%.

Oil slips for a second straight day
Turning to the Middle East, gold got a boost as oil prices dipped for a second straight session and further ate into their weekly surge. The decline came amid an easing of supply disruption fears and some encouraging signs on possible diplomatic progress between the U.S. and Iran.

The shutdown of the critical East-West Pipeline in Saudi Arabia last Friday sharply drove up disruption jitters this week. The kingdom had been using the conduit as an alternative to shipping crude through the Strait of Hormuz, but its widening conflict with Iran-backed Houthis in Yemen has also led to threats to the Bal el-Mandeb Strait, another vital waterway in the Gulf.

But U.S. Energy Secretary Chris Wright on Tuesday said the East-West Pipeline would start operating “very soon.” Then on Wednesday, Bloomberg News reported that Saudi Arabia was looking to restart the pipeline at half capacity within days, citing a person familiar with the matter.

Separately, Reuters reported that the kingdom was offering more crude oil loadings to Asian refiners through ship-to-ship transfers off Oman’s Sohar port in an effort to make up for the pipeline’s shutdown, citing people familiar with the matter.

Elsewhere, President Donald Trump told reporters that “hopefully” the U.S. was towards the end of its war with Iran, adding that Tehran was “very much wanting to make a deal.”
Separately, several media reports said the U.S. State Department had granted visas to top Iranian officials, including the president and foreign minister, to attend next week’s United National General Assembly high-level meeting in New York.