Fed rate decision: what gold needs to hear on Wednesday

Key points

• The Fed's rate decision lands on Wednesday 28 October, with markets pricing a 92% chance of a hold
• The bigger question for gold is December, where futures price an 83% chance of another quarter-point hike
• On our data, gold has moved about twice as much the day after a Fed decision this year as on the day itself
• Gold closed Friday near $3,997, 26% below January's record, after a 4.1% weekly fall

The Fed rate decision on Wednesday 28 October is expected to be a hold, but gold will trade on what the Federal Reserve says about December. Futures price an 83% chance of a hike at that meeting. With gold near $3,997 after its worst week since September, the statement and press conference matter more than the decision itself.

Why it matters: Gold pays no interest, so every signal that rates stay higher for longer raises the cost of holding it. A firm hint at a December hike could push gold through $4,000 support; a softer tone on oil-driven inflation could start a recovery.

Where does the Fed stand going into the meeting?

The Fed is in a hiking cycle again. It raised its target range by a quarter point to 3.75% to 4.00% at its September meeting, its first increase since 2023. Several officials have since said more may be needed. Governor Christopher Waller, for one, argued this month for more hikes but not back to back, which is one reason so few traders expect a move this week.

The market agrees. On Friday, futures pricing gave a 92% chance that rates stay where they are on Wednesday, and 94 of 100 economists in a Reuters poll cited by Newsquawk said the same. December is a different matter, with hike odds at 83%, down a little from close to 90% earlier in the week.

Why does oil change the picture?

Oil is the reason the December odds are so high. Attacks on Saudi energy sites claimed by Houthi forces this week pushed Brent crude above $110 on Thursday and to a six-month high near $116 on Friday. Dearer oil feeds straight into petrol, freight and airfares, which feeds the consumer price index the Fed is trying to bring down.

This is why a war that would normally help gold has hurt it. Investors are reading each jump in oil as a reason for higher rates, not as a reason to buy safety. Gold fell 2.8% on Thursday alone, a move larger than 98.5% of trading days since 1968 on our price data.

The Fed's own framework gives it room to look through a supply shock in energy, on the view that it raises prices once rather than setting off lasting inflation. Whether the committee takes that view this time is the key unknown. We have seen this tension before: last week's hot CPI and PPI moved gold for a day and then faded.

What could the Fed say, and what would each mean for gold?

There are three realistic outcomes. None is a forecast; each is a scenario with the mechanism behind it.

A hold with a hawkish tone

This is the central case. The statement keeps the language that further tightening may be appropriate and the Fed chair says the committee is watching energy prices closely. If that happens, December hike odds likely stay above 80%, Treasury yields hold up and gold stays under pressure, because the cost of holding a metal that pays nothing stays high.

A hold that leans toward patience

Here the Fed signals it will look through the oil spike and wants to see how the September hike works through the economy. December odds would likely fall, yields would ease and the dollar could slip. That combination has been gold's best friend for decades, and it would give gold room to win back the $4,100 area it lost on Thursday.

A surprise hike

Markets give this about an 8% chance. A hike now, with oil near $116, would tell investors the Fed is worried about inflation expectations. The first reaction in gold would probably be another sharp fall, though a hike can also raise fears for growth, which in the past has brought buyers back within days.

What does our data say about Fed days?

Gold's reaction to a Fed decision this year has tended to come late. On our price data for the six decision days so far in 2026, gold moved by about 1.3% on average on the day itself, up or down. On the following trading session it moved by about 2.6% on average, twice as much.

The pattern shows up in single meetings. After the March decision gold fell 1.7% on the day and another 4.5% the next. After the late-July meeting it slipped 0.5% on the day and then jumped 2.75%. In September, when the Fed raised rates, gold rose 0.75% on decision day and another 0.9% after it, because the hike was fully expected and the guidance was milder than feared.

The lesson for readers is simple. A quiet Wednesday does not mean the reaction is over. Thursday, with US third-quarter GDP and September PCE inflation due on the same morning, is the more likely day for a big move.

How far has gold already priced in?

A fair amount. Gold closed Friday at about $3,997, down 6.7% over the past month and 26% below January's record of about $5,426. Over the past 30 days, that slide is steeper than about 94% of 30-day stretches since 1968, on our data.

That does not mean gold cannot fall further. Several bank and broker notes this week pointed to $3,900 as the next support. But it does mean a lot of hawkish news is in the price already. UBS said in October that it expects buyers to step in around $4,000, pointing to steady inflows into gold funds and central bank buying it puts at 750 to 1,000 tonnes a year.

What does it mean for buyers outside the US?

The Fed sets the tone well beyond America. Gulf buyers feel it most directly, because the dirham and the riyal are pegged to the dollar: a 22-carat gram in Dubai was worth about 432.60 dirhams at Friday's close, on our calculation, down about 18 dirhams in a week. Any move in gold after Wednesday passes straight through to those prices.

Buyers in India, Europe and Japan see the Fed through their exchange rate as well as through gold. A hawkish Fed that lifts the dollar can cushion a fall in the gold price for a rupee or euro buyer, because each dollar of gold costs more local money. That is one reason the European Central Bank's decision on Thursday, a day after the Fed, also matters for gold priced in euros, at about 3,568 euros an ounce on Friday.

For a longer look at how rates feed into gold, see our guide to the Fed and the gold price.

What to watch

• Wed 28 Oct: Fed decision and the chair's press conference. Watch the line on further tightening and any comment on oil.
• Thu 29 Oct: US third-quarter GDP and September PCE inflation, the Fed's preferred price measure, plus the ECB decision.
• Fri 30 Oct: CFTC positioning data, to see whether hedge funds kept cutting gold longs through the Fed.