Gold price drops to $4,035oz as Fed votes 10-2 in favor of rate hold

“The Committee decided to maintain the target range for the federal funds rate at 3-3/4 to 4 percent, in support of the Federal Reserve's dual mandate,” the Federal Reserve said in its statement. “The Committee is continuing its policy of maintaining ample reserves in the banking system.”

“Economic activity is expanding at a strong pace,” the statement read. “While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little.”

The central bank warned, however, that inflation remains elevated. “The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee's 2 percent goal,” they said. “The Committee will deliver price stability.”

FOMC members Lisa Cook and Beth Hammack voted against the monetary policy action and the statement, both preferring to raise the target range for the federal funds rate by 25 basis points at Wednesday's meeting.

The Fed statement did not include any guidance about future rate moves.

Gold prices dropped in the wake of the announcement, with spot gold last trading at $4,035.48 per ounce for a loss of 0.60% on the session.

Chris Zaccarelli, Chief Investment Officer of Northlight Asset Management, said the Fed left plenty of clues that they were planning to raise rates in December.

"As always, a lot can change in the data between now and then, but if it weren’t so close to the midterm elections, they probably would have raised rates today, and now it’s unlikely that anything will stop them from raising rates at the next meeting," he said. "Next year, the picture is less clear. The futures are predicting two more rate hikes, and that makes sense if everything stays the same, but as we have learned over the past couple of years, things rarely do (e.g. tariffs, Iran war, etc)."

Zaccarelli expects the economy to sufffer as rates move higher and the AI buildout is impacted. "If we have a growth slowdown or recession in the next 12 months, then of course the Fed will react and we will see lower interest rates by the end of next year, but if the economy continues to be resilient despite all of the macroeconomic headwinds, then the Fed may end up raising even more than the 2 times that are currently priced in."

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