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

The Federal Reserve announced on Wednesday, October 28, that the Federal Open Market Committee (FOMC) voted 10-2 to keep its policy rate unchanged. The decision matched the market consensus, according to Kitco News.

In its statement, the Fed said the Committee decided to maintain the target range for the federal funds rate at 3-3/4 to 4 percent, in support of its dual mandate. The Committee also said it is continuing its policy of maintaining ample reserves in the banking system. The statement described economic activity as expanding at a strong pace. Kitco's report, as retrieved, gave the vote as 10-2 but did not set out the dissenters or their reasons in the portion available.

Gold reacted with a modest decline. Kitco reported spot gold last trading at $4,035.48 per ounce after the announcement, a loss of 0.60% on the session. That was a little below the levels seen earlier in the day. Reuters reported spot gold at about $4,050.55 per ounce by 1249 GMT, down 0.2%. In a separate Reuters report, spot gold was $4,044.54 as of 11:46 a.m. EDT, down 0.3%.

Oil prices were a key theme in the run-up to the decision. Reuters reported that oil rose by more than 1% after an attack on a refinery in Saudi Arabia, the world's top crude exporter. The attack renewed concerns about supply risks tied to conflicts in the Middle East. Higher energy prices can feed inflation worries. Elevated energy prices also bolster expectations of higher-for-longer interest rates, which raises the opportunity cost of holding non-yielding assets such as gold. Hamad Hussain, a climate and commodities economist at Capital Economics, said the risk of a more hawkish Fed stance than markets expect appeared to be weighing on gold.

Market pricing before the meeting pointed to a possible rate increase later in the year. Reuters cited CME's FedWatch Tool as showing an 83% probability of a hike in December. Other reports put that figure at 84%. An analyst quoted by Mining.com, which republished Reuters, said the likelihood of a rate lift at this meeting was very low, but that December and March were both live possibilities.

Attention now turns to the US Personal Consumption Expenditures (PCE) data, due on Thursday. The PCE price index is a gauge the Fed watches closely because it targets 2% inflation. Nikos Tzabouras, an independent markets analyst, told Reuters that a soft PCE reading combined with a Fed that fell short of hawkish expectations could allow bullion to rise. That is one analyst's view, and market outcomes remain uncertain.

The Fed's decision was also followed by a press conference from Chair Kevin Warsh, which investors had been watching for clues on the path of interest rates.

Separately, a Reuters poll showed analysts cutting their 2026 gold price forecasts for a second straight quarter. They cited high Treasury yields, a strong US dollar and expectations that rates will stay higher for longer. The poll still expects a recovery in 2027.

This article is a factual summary of reported events and is not investment advice. Gold and currency prices can move quickly, and past moves do not indicate future results.

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