Gold fell 1% after the Fed held rates steady, signaling a rate hike this year

Gold prices fell more than 1% on Wednesday after the US Federal Reserve kept its benchmark interest rate steady but pointed to raising borrowing costs later this year, sending the dollar higher.

Spot gold was down 0.7% at $4,299.89 an ounce by 2:40 PM EDT (1840 GMT). US gold futures rose 0.6% to settle at $4,381.40.

Nine US 19 central bank policymakers now believe they will need to raise the policy rate this year, according to estimates released Wednesday after the Fed announced its decision to leave the policy rate in its current 3.50%-3.75% range.

In his inaugural press conference after his first policy meeting as Fed chair, Kevin Warsh said he was launching five task forces to review how the central bank conducts its business in critical policy areas.

“This is a new fad – Warsh is sharp, sure, animated – he will be a steward and not a trustee. The message is that changes are coming, but after due consideration,” said Tai Wong, an independent metals trader.

Also read | The dollar rose as the Fed held rates but projects a hike later this year

“He also said twice that he only sees rates restrained in housing…which makes him more hawkish than Powell. I think that’s what’s driving the market down. The statement and the dot plot are hawkish and Warsh has done nothing to push back against that.”

Markets now see a 78% chance of a rate hike in December this year, up from 61% before the Fed’s decision, according to the CME FedWatch tool.

The US dollar rose after the rate decision, making greenback-priced bullion more expensive for foreign buyers, while oil markets were also higher, keeping inflation worries alive.

While gold is seen as a hedge against inflation, higher interest rates pressure bullion, as it offers no yield.

Spot gold hit more than six-month lows last week as inflation fears fueled by the Iran conflict fueled expectations of a rate hike.

US President Donald Trump said the deal reached with Iran this week is not final, and he could resume the bombing campaign if he doesn’t like it.

Silver fell 1.1% to $69.41 an ounce. Platinum fell 2% to $1,768.03 and palladium fell 1.1% to $1,336.91.