Gold Touches $4,100 After Fed Holds Rates Despite Hike Concerns

Gold rose after the Federal Reserve held interest rates steady, briefly touching $4,100 an ounce.

According to Bloomberg, spot gold climbed as much as 0.8% on July 29 to reach $4,100 an ounce. The metal had already gained 0.9% a day earlier.

The Fed voted 9-3 at its July 29 Federal Open Market Committee meeting to leave its benchmark rate unchanged. Still, higher energy prices tied to the war in the Middle East are adding to inflation pressure, and dissent from three officials left open the possibility of future rate increases.

Fed Chair Kevin Warsh emphasized that the decision to hold rates steady did not mean the central bank had stopped responding with monetary policy. If inflation remains elevated over the forecast period, interest rates could be part of the solution, he said, while adding they would not be used as the only tool.

Gold has fallen more than 20% over the past five months since the war between the US and Iran began. Fighting in the Middle East pushed up energy prices and fueled inflation concerns, while the prospect of higher rates for longer weighed on non-yielding bullion.

Since late June, however, bargain buying has helped support gold around $4,000 an ounce.

Nicky Shiels, head of research and metals strategy at MKS PAMP, said the Fed's decision to hold rates could trigger a relief rally in previously out-of-favor assets such as precious metals and bonds. She added that investors are increasingly likely to re-enter gold and identified $4,200 as the key level for the metal's next move.

Rising tensions in the Middle East are also supporting gold, a traditional haven asset. President Donald Trump recently vowed retaliation after Iran attacked a US military base in Jordan, and the US resumed airstrikes on Iran. The US and Saudi Arabia had earlier struck facilities used by pro-Iran armed groups in Iraq.

As of 7:50 a.m. in Singapore, spot gold was up 0.6% at $4,091.40 an ounce. Silver rose 1.1% to $58.37, while platinum and palladium also advanced. The Bloomberg Dollar Spot Index fell 0.1% after dropping 0.3% the previous day.