Just as markets were still digesting the easing of geopolitical risks following the temporary peace agreement between the United States and Iran, unexpectedly hawkish signals from newly appointed Federal Reserve Chair Kevin Warsh poured cold water on gold bulls.

The latest bout of volatility in gold prices, triggered by a sharp shift in policy expectations, highlights the complex dynamics currently shaping the gold market. The combined pressure of hawkish monetary policy and easing geopolitical tensions is testing the patience and conviction of gold investors.

On Wednesday, the Federal Reserve left interest rates unchanged at 3.50%–3.75%, as widely expected. However, the real market-moving event was the release of the updated quarterly interest-rate projections, commonly known as the dot plot.

The projections showed that among the 18 officials who submitted forecasts, nine expect at least one rate hike in 2026, including five officials forecasting two hikes and one official projecting three hikes.

This represented a dramatic shift from the March dot plot, when not a single policymaker expected a rate hike during the year.

Although new Fed Chair Kevin Warsh did not submit his own dot plot projections, the streamlined policy statement issued under his leadership removed all forward guidance regarding future actions.

Markets interpreted this as a distinctly hawkish signal.

During the press conference, Warsh emphasized the central bank’s commitment to controlling inflation and expressed concern about second-round inflationary effects.

According to the CME FedWatch Tool, the probability of a Federal Reserve rate hike in December surged from approximately 60% before the statement to 85% afterward.

The stronger US dollar delivered a double blow to gold.

On one hand, dollar-denominated gold becomes more expensive for overseas buyers using other currencies, directly reducing physical demand.

On the other hand, dollar strength is often associated with tighter global liquidity conditions and weaker risk appetite, further reducing gold’s attractiveness as a safe-haven asset.

The Federal Reserve’s confidence in adopting a more hawkish stance is rooted in the resilience of the US economy.

Data released on Thursday showed that initial jobless claims for the week ending June 13 declined by 4,000 to 226,000. Although the figure was slightly above economists’ expectations of 225,000, it remains near the upper end of this year’s range of 190,000 to 230,000.

Warsh also stated during the press conference that members of the Federal Open Market Committee believe the labor market remains stable, and that some policymakers consider conditions to be even stronger than generally perceived.

Three consecutive strong Non-Farm Payroll reports and an unemployment rate that has remained at 4.3% for three straight months have provided the Federal Reserve with a solid foundation for maintaining its restrictive policy stance.

Market Analysis:

Gold continued to consolidate lower on the 4-hour chart, with both the MACD lines and histogram expanding below the zero line.

If inflation pressures continue to exceed expectations, expectations for further rate hikes are likely to strengthen, placing additional pressure on gold prices.

Conversely, if economic data begins to show signs of weakness, easing rate-hike expectations could provide gold with an opportunity to stabilize and recover.