Spot gold opened the week of September 14-18 at $4,330.04 per ounce, dipped to a low of $4,235.24, peaked at $4,399.80, and settled at $4,378.32, posting a weekly gain of $30.32 or 0.7%, with a bullish weekly candlestick that snapped a three-week losing streak. The Federal Reserve delivered its first rate hike in three years and signaled the possibility of another move before year-end, briefly pushing spot gold below $4,240 per ounce.
However, updated economic projections revealed a shallower and slower rate path than markets had previously priced in. Meanwhile, the broader forces underpinning gold—fiscal deficits, inflation, geopolitical uncertainty, and shifts in global reserve allocation—remain firmly intact. Dip-buying flooded in, allowing spot gold to hold critical support and close the week higher, ending three consecutive weeks of declines.
Looking ahead, public remarks from multiple Fed officials this week will offer fresh clues on whether an October hike is on the table. The "major decision" U.S. President Donald Trump has promised to announce during his Tuesday address at the UN General Assembly, along with developments in the Middle East, also warrant close attention. Beyond these near-term catalysts, sustained central bank purchases, robust investment demand, continued inflows into gold ETFs, and prevailing medium-to-long-term bullish sentiment should keep pushing prices upward.
The Fed's First Hike in Three Years With a Hawkish Hint of More to Come
The Federal Reserve voted unanimously, 12-0, to raise the federal funds rate target range by 25 basis points to 3.75%-4.00%, marking the first rate increase since July 2023 and the first policy adjustment under Chair Warsh, who assumed the role in late May. The hike itself was broadly in line with pre-meeting expectations.
The latest economic projections show the median federal funds rate at 4.1% by the end of 2026, up from the 3.8% forecast in June. The 2027 median also stands at 4.1%, compared with a prior 3.6%, while 2028 and longer-run medians rose to 3.9% and 3.2%, respectively. The dot plot reveals that 16 of 18 officials project at least one more hike in 2026, with four anticipating two additional moves. Warsh himself did not submit rate or economic forecasts, so the dot plot does not represent his personal policy path commitment.
The economic projections also display a classic "stronger growth, lower unemployment, higher inflation" mix. The Fed upgraded 2026 GDP growth from 2.2% to 2.3% and 2027 from 2.3% to 2.4%, while lowering the 2026 unemployment forecast from 4.3% to 4.1%. At the same time, 2026 PCE inflation was revised up to 3.7% from 3.6%, and core PCE rose to 3.4% from 3.3%.
At the press conference, Warsh placed price stability at the center of policy. He said inflation is "too high and has persisted for too long," adding that summer data showed no meaningful improvement in underlying inflation trends. He also emphasized that domestic spending remains resilient, productivity growth is strong, capital investment is vigorous, and both the labor market and broader economy have strengthened. Current broad financial conditions can hardly be called "tight," so this move amounts to "withdrawing some accommodation."
The FOMC statement also removed prior language attributing high inflation mainly to "supply shocks," signaling that policymakers no longer view energy and tariff-related disruptions as purely one-off factors. However, Warsh stopped short of committing to any action at the next meeting, continuing his post-appointment practice of de-emphasizing traditional forward guidance. On the recent rise in long-term Treasury yields, he attributed it mostly to a stronger economy, competition for capital from AI and hyperscale tech firms' capital expenditures, and global political risks—rather than interpreting it as a loss of market confidence in the Fed's inflation-fighting credibility.
Tensions between the White House and the Fed quickly became public after the decision. President Trump said the same day that U.S. interest rates "should be 1% or lower," citing America's best credit standing globally. According to CME's FedWatch tool, market pricing implies roughly a 55% probability of a 25-basis-point hike at the October meeting. Goldman Sachs has already shifted to predicting another hike in October, while JPMorgan, Morgan Stanley, and Deutsche Bank lean toward a December move.
Escalating Middle East Conflict and the Energy Risk Question
President Trump stated that the war with Iran is approaching a critical phase and that he must decide whether to resume large-scale military operations to force an end to the conflict. He also claimed the U.S. is "easily winning" the war. Military frictions between U.S. and Iranian forces around the Strait of Hormuz persist, with spillover effects extending toward Saudi Arabia and the Red Sea.
Meanwhile, British maritime agencies reported incidents of small boats chasing and attempting to intercept oil tankers east of Aden, Yemen, keeping shipping risks elevated in the Red Sea and the Bab el-Mandeb Strait. On the diplomatic front, limited signs of de-escalation have emerged. Lebanese outlet Al-Akhbar reported that Saudi Arabia has requested Omani mediation to broker a two-week ceasefire with the Houthis. U.S. officials have already held talks with Houthi representatives in Oman. Washington has also approved the Iranian president and foreign minister to attend next week's high-level UN General Assembly sessions. Trump added that he would announce a "major decision."
Military escalation options remain very much on the table. U.S. Treasury Secretary Bessent said the current U.S. goal is to "end the Iranian threat," not merely "manage" it, while Israeli Prime Minister Netanyahu vowed to see the mission through and floated the idea of toppling the Iranian regime. Iran, for its part, continues to bolster its readiness, announcing large-scale military exercises and unveiling a 2026 civil defense plan that prepares for three scenarios: war's end, ceasefire, and full-scale conflict.
The Conventional Wisdom That Rate Hikes Are Bearish for Gold Is Being Tested
Despite the Fed's 25-basis-point hike this week and hints of further tightening within the year—factors that should have weighed heavily on gold—the metal did not break down. Instead, it held key support into the weekend, demonstrating remarkable resilience. The traditional argument that "higher rates are necessarily bearish for gold" is increasingly being challenged.
Investors are shifting their focus to deeper structural drivers: deteriorating government finances, persistent inflation, geopolitical uncertainty, and changing global reserve allocations. Market participants are beginning to realize that while the Fed can raise rates, it cannot solve America's fiscal problem. In some ways, higher rates only make that problem worse.
Higher rates may slow inflation, but they also raise the servicing cost on more than $40 trillion in government debt. Interest payments alone now exceed $1 trillion annually. The longer rates stay elevated, the more uncomfortable that arithmetic becomes.
Gold ETF holdings have climbed to seven-month highs. Investors are buying gold now more as a hedge against deteriorating government fiscal positions, lingering inflation, currency uncertainty, and geopolitical instability. There will undoubtedly be more volatility ahead. A renewed spike in bond yields or oil prices could pressure gold, especially if markets begin pricing a more aggressive tightening cycle, but these factors are increasingly becoming short-term considerations within a larger, longer-term narrative.
With the Fed fighting inflation, bond markets grappling with debt, governments continuing to spend, central banks diversifying their reserves, and geopolitical uncertainty refusing to fade, it is hardly surprising that gold is refusing to crash. The latest Kitco News weekly gold survey shows Wall Street turning unanimously bullish after gold's post-Fed rally, and retail investors have strengthened their bullish majority as gold delivered a solid weekly performance.
On the technical front, gold faces short-term volatility, but the medium-to-long-term uptrend remains intact. Immediate support sits in the $4,340-$4,320 per ounce zone, with key support at $4,250-$4,230. Resistance is located at $4,420-$4,460, with key resistance in the $4,510-$4,600 range.
(Author: Li Yuefeng, Researcher at Beijing Gold Development and Economic Research Center)
[Gold Time] is a special column created by Xinhua Finance and China Gold News, focusing on the gold and jewelry market. It provides comprehensive coverage of policy updates, investment intelligence, and risk analysis across the gold and jewelry industry, delivering authoritative and professional financial information services for the sector.
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