An explanation of the relationship between the Fed’s FOMC rate decision and gold prices, with the key information summarized below:

I. Key time points

• 2:00 a.m.: The Fed’s FOMC announces its rate decision

• 2:30 a.m.: Fed Chair Warsh holds a press conference

II. What is the FOMC?

The FOMC is a 12-member interest-rate decision-making group within the Federal Reserve. It holds eight meetings each year to decide the level of U.S. interest rates.

III. The logic behind the relationship between Fed rate hikes and gold prices

1. Core principle: Gold does not generate interest, while U.S. Treasuries pay interest. The higher the interest rate, the higher the opportunity cost of holding gold, so funds flow toward higher-yielding assets. Therefore, interest rates and gold prices generally move in opposite directions.

2. Expectations for this rate hike: The market broadly expects a 25-basis-point rate hike, taking rates to 3.75%-4%, the first rate hike since 2023.

IV. The two key focuses of this decision

1. Dot plot: The 12 officials will each provide their expectations for future interest rates. The key is whether they expect another rate hike later this year.

2. Warsh’s remarks: Pay attention to whether he describes this rate hike as “a precaution against inflation” or says “this is just the beginning.”

V. Market impact and trading recommendations

• Historical experience: On the day the dot plot is released, the market usually absorbs only 20% of the information, with the rest taking several months to be fully digested.

• Assessment for this time: The market has already largely priced in the rate-hike expectations, so the most likely scenario is that “rates are raised as expected, but the rhetoric remains restrained, resulting in the negative news being fully priced in after the decision.”

• Exception: If the dot plot shows that further rate hikes are still needed and Warsh hints at additional hikes, this would be a genuine negative surprise that the market is unprepared for, and gold would resume its search for support on the downside.

• Trading recommendation: Tonight, focus on three points: whether rates are raised, the dot plot, and Warsh’s remarks. $BTC

‌$ETH

‌$XAUUSD

‌$SNDK