The price of spot gold fell by 0.70% during Thursday's US trading session. Markets are still digesting the Federal Reserve's unexpectedly hawkish policy pivot, which has significantly strengthened the US dollar, pushing it to a new high for the year. The robust dollar is applying downward pressure on gold. The precious metal had earlier reached a high near $4,330 before trading around $4,223.

Dollar Strengthens on Fed Repricing, Gold Weakens

Despite the shift in the Fed's stance, optimism about a potential end to Middle East conflicts and a rally in technology stocks have boosted overall market risk appetite. The Federal Reserve held its benchmark rate steady at 3.50%-3.75% on Wednesday and updated its economic projections. Among 19 policymakers, nine now anticipate an interest rate increase before the end of this year.

While Fed Chair Wash did not participate in submitting a projection for the dot plot, he stated respect for the rate expectations submitted by his colleagues. He noted that forward guidance is "no longer appropriate" in the current economic environment and emphasized that the labor market remains strong, with price stability remaining the central bank's core policy objective.

Data from the CME FedWatch Tool shows market pricing now implies an 85% probability of a Fed rate hike by December, a substantial increase from 61% prior to the policy statement. The Fed's hawkish tilt has weighed on gold and lifted the dollar. The US Dollar Index continued its ascent on Thursday, touching 100.81, its highest level since May 2025.

The median projection from Fed officials indicates inflation is expected to fall to 3.6% in 2026, not reaching the 2% target until 2028. Growth forecasts were slightly lowered, with full-year GDP growth projected at 2.2%, while the unemployment rate is expected to remain near current levels.

On the data front, US initial jobless claims fell from 230,000 to 226,000, slightly above the market forecast of 225,000 but still indicative of a resilient labor market. Due to the Juneteenth holiday, no major US economic data is scheduled for release this week. Next week will see a flurry of key indicators, including preliminary PMI data, employment figures, the final Q1 2026 GDP reading, and the Fed's preferred inflation gauge, the core PCE price index.

Technical Outlook for Spot Gold: Fed Stance Drives Price Below $4,300

Following the Fed's decision, gold's trend turned bearish, with the price breaking below the June 16 support level of $4,306. It touched a two-day low of $4,219 before staging a minor rebound. Although it briefly recovered to $4,330, bullish momentum quickly faded, and the price remained below $4,300 at the time of writing.

The Relative Strength Index has moved into bearish territory, signaling that sellers currently dominate the market. If spot gold breaks below $4,200, it could test the June 11 low of $4,023, approaching the key psychological level of $4,000. On the upside, a sustained move above $4,300 is needed for bulls to regain control, with a sustained recovery requiring a breakthrough above the significant resistance levels at $4,350 and $4,400.