Gold hawkish Fed moves kept pressure on prices after the Fed projected a rate hike this year and traders lifted bets on more tightening.
Gold fell on Wednesday after the Fed’s updated dot plot pointed to a possible rate increase this year. The source said the move surprised markets and pushed the metal lower at first. Later, prices steadied briefly as traders waited for Fed Chair Warsh’s first press conference.
However, the selloff resumed when traders concluded Warsh would not offer fresh signals or forward guidance. The source said bearish positions grew as markets focused on higher real yields. As a result, gold closed the gap created before the Fed decision.
Gold Hawkish Fed Pressure Builds
Warsh said incoming data and financial markets will guide the Fed. He said financial markets work best when they respond to data, and are less efficient when they must guess how the Fed will respond. He also said financial markets are the most important source of information for the central bank.
Meanwhile, Trump wrote on Truth Social that rate hikes could happen. The source said he did not object to the Fed’s decision, unlike his usual stance under Fed Chair Powell. That comment, according to the source, gave support to the view that the Fed could act as needed.
Traders now price a 30% chance of a rate hike in July. That rises to 65% for September, which the source called the most likely outcome. By year-end, markets price in 37 basis points of tightening, up from 18 basis points before the Fed decision.
Chart Levels and Data in Focus
The source said this shift should keep weighing on gold until the next round of economic data. It also said a drop in oil prices after the end of the US-Iran war could lift activity and still require rate hikes.
On the daily chart, gold rejected the prior swing low near 4,360 and then fell after the Fed decision. The price is now testing a major upward trendline. Buyers are stepping in below that line and targeting a move back above 4,360, with 4,600 as the next level.
On the downside, sellers want a break below the trendline to target 3,885. On the 4-hour chart, the source said gold bounced from support near 4,240 after closing the positive gap. If price stays in the 4,240 to 4,360 range, sellers may keep defending resistance, while buyers need a break higher to reopen the path to new highs. The next data point is the latest US Jobless Claims report.
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