Gold climbs after Fed decision and Warsh's remarks

Gold prices rose during Wednesday's session following the Federal Reserve's latest interest rate decision and relatively hawkish remarks from Federal Reserve Chair Kevin Warsh.

In trading, spot gold was up 1% at $4,079.60 per ounce as of 20:33 GMT.

The Federal Reserve left its benchmark interest rate unchanged at 3.50%-3.75% in a 9-3 vote, after three policymakers favored a 25-basis-point rate hike.

The market reaction was driven almost entirely by developments in the United States, while the Bank of Canada's meeting summary, released about 30 minutes before the Fed announcement, had little impact on currency movements.

Speaking after the decision, Warsh reaffirmed the Fed's commitment to bringing inflation back to target and maintaining price stability. He also stressed the central bank's independence, emphasized that policymakers would continue to monitor incoming economic data, and pledged to use all available tools necessary to return inflation to its objective.

Markets scale back rate hike expectations

Analysts said financial markets repriced the outlook for US monetary policy following the meeting, reducing expectations for additional rate hikes over the coming meetings.

The probability of at least one rate increase by the September 16 meeting fell to around 64%, down from roughly 80% before the Fed's decision. Meanwhile, the odds of two rate hikes by December declined to about 42%, compared with 57% previously.

Although the Fed's statement struck a relatively hawkish tone and featured the first three dissenting votes since Kevin Warsh became Fed Chair, Warsh declined to offer any forward guidance on the future path of interest rates. He said the committee does not provide advance policy commitments and that markets should respond to incoming economic data rather than predetermined expectations.

Gold is widely regarded as a hedge against inflation, but higher interest rates increase the opportunity cost of holding the non-yielding precious metal.

Geopolitical developments

On the geopolitical front, the US military said Tuesday it intercepted several ballistic missiles launched by Iran toward US forces in the Middle East, describing the incident as a "surprise attack."

In response, Iran's Islamic Revolutionary Guard Corps said it had launched several ballistic missiles targeting a US air base and the headquarters of US Central Command in Jordan.