In its new projections, 11 out of 18 Fed officials projected at least two quarter-point interest rate increases for 2023, even as officials in their statement pledged to keep policy supportive for now to encourage an ongoing jobs recovery.
"The Fed has a gameplan that they're going to be a removing all this accommodation and it's just this initial knee jerk reaction (in gold)" said Edward Moya, senior market analyst at OANDA, adding that the Fed was more hawkish than markets expected and gold could fall further towards $1,830.
The central bank however held its benchmark short-term interest rate near zero and said it will continue to buy $120 billion in bonds each month to fuel the economic recovery.
Gold was further bruised by a jump in the dollar and yields after the announcement. Higher yields raise the opportunity cost of holding non-yielding bullion.
"But the Fed is not going to be leading the charge in tightening against other major central banks and it will be one of the last to tighten, allowing for dollar weakness to remain fully intact" which should support gold, Moya said.
Market participants are now keeping a close watch on Fed Chair Jerome Powell's news conference after the statement.
Powell said Fed policy would continue to deliver "powerful" support to economy and flagged concerns over the economic recovery. He also said inflation could turn out to be higher and more persistent than expected.
Silver rose 0.3% to $27.71 per ounce, while palladium rose 1.6% to $2,805.86 and platinum fell 1.6%, to $1,134.50.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.