Happy Friday, traders. Welcome to our weekly market wrap, where we take a look back at these last five trading days with a focus on the market news, economic data, and headlines that had the most impact on gold prices and other key correlated assets—and may continue to in the future.
So, what kind of week has it been?
Here's what you need to know:
- Gold took a more volatile path than expected but rebounded from a post-FOMC low near $4,260/oz to trade just above $4,350/oz shortly after the US market open on Friday, putting the yellow metal in position for a moderate weekly gain.
- The Federal Reserve delivered the week's main event on Wednesday, unanimously raising policy rates by 25 basis points. Gold's sharp initial drop appeared tied less to the hike itself than to projections showing elevated inflation expectations and another 25-basis-point increase before the end of 2026.
- Thursday brought the countermove as crude oil slid back toward and then below $100 per barrel, US Treasury yields eased, and gold recovered to around $4,360/oz. The Bank of Japan's overnight rate hike to 1.25% added another tailwind into Friday.
- Next week's macroeconomic calendar is relatively light, leaving public comments from key FOMC participants and any renewed moves in oil, Treasury yields, and the US Dollar as important catalysts to watch.
So, What Kind of a Week Has It Been?
Gold prices have had a more volatile go this week than was expected, even with most global markets focused squarely on the anticipation and then reaction to a consequential FOMC meeting and policy decision. Where analysts were generally preparing for another consecutive weekly loss for the yellow metal—or, at best, a relatively flat run in the event that the expected-and-delivered rate hike was fully priced in—shortly after the US market open on Friday, gold trades just above $4,350/oz and looks poised to close with a moderate gain compared to Sunday night.
Fed Hikes Rates as Projections Point to More Tightening
At the close of the September FOMC meeting on Wednesday, the Federal Reserve announced a 25-basis-point hike in policy interest rates. The hike was unanimously agreed upon by voting members of the committee and is the US central bank's first hike since 2023. Given recent inflation data that has shown price pressures to be stubbornly elevated and the state of the global oil market, which implies further price increases worldwide, financial markets on Monday already implied a greater than 80% likelihood of a hike this week. With the recent slides in gold spot pricing, it was expected that the negative impact of higher rates on non-yielding assets was already priced into gold's current market value to some extent.
Still, shortly after the FOMC's announcement and during Chairman Kevin Warsh's post-meeting press conference, gold dropped sharply from $4,340 to as low as $4,260/oz. Analysis that followed the FOMC indicates that this selloff was less about the market being shocked by Wednesday's hike and much more a reaction to what the Fed's quarterly Summary of Economic Projections implied about the near- to medium-term path of the economy. Alongside elevated inflation expectations extending out multiple quarters, the SEP's anonymized "dot plot" shows a consensus expectation for one additional 25-basis-point hike before the end of 2026. This information solidifies the projection that the FOMC already expects both oil prices and, as a direct result, inflation to remain elevated at least into Q1 of 2027.
Oil Retreat and Bank of Japan Hike Fuel Gold's Rebound
After Wednesday delivered the trading volatility that was generally expected, Thursday brought the real surprise. Either in reaction to an optimistic shift in expectations for the ongoing conflict between the US and Iran centered around a pivotal shipping lane for oil—which is frankly hard to pin down from our view—or simply as a technical correction from crude oil prices pushing above $105 per barrel, oil prices slid to $100 on Thursday and later crossed below it. This acted as a pressure-release valve across financial markets, best reflected in an easing of US Treasury yields after the 10-year Note had surpassed 5.0%. At the same time, gold prices rebounded, and by the time US markets opened on Thursday, prices had already regained $4,360/oz.
Gold's unexpected rebound was aided further during the Thursday-to-Friday overnight session as the Bank of Japan announced its own benchmark rate hike to 1.25%, the highest BoJ policy rate since 1995. More generally, the move lent relief to assets like gold that trade inversely to the US Dollar by closing the rate gap between the US and one of its primary trading partners. It also serves to lessen markets' interest in the yen carry trade specifically, which is typically major competition against gold for traders seeking a safe-haven position.
Looking Ahead
Of course, the dominant reality of the current macro environment—that rates have increased and yields with them, and that there is a strong expectation for them to remain at or above the current mark—remains in play. Thursday's more fickle winds that have supported a gold rally are very subject to change. Already, with the start of US trading on Friday, we see the yellow metal easing back. Next week brings little in the way of direct macroeconomic data to impact the market, but we will be interested to parse a number of public comments from key FOMC participants.
In the meantime, traders, I hope you can get out and safely enjoy your weekend for the next couple of days. After that, I'll see you back here next week for another market recap.
