The Federal Reserve kept interest rates unchanged at its October meeting, but its cautious message about inflation and the possibility of further rate hikes kept investors on edge.
The US Federal Reserve concluded its two-day FOMC meeting on 28 October 2026, deciding to leave interest rates unchanged at 3.75%–4.00%. The decision was widely expected by markets, but the accompanying message suggested that the battle against inflation is far from over.
The vote was 10–2, with Fed officials Lisa Cook and Beth Hammack favouring another 0.25 percentage-point rate increase. The Fed also upgraded its assessment of the US economy, describing economic activity as strong, while warning that inflation remains elevated.
How did financial markets react?
US stock markets edged higher following the announcement, with both the S&P 500 and Nasdaq gaining approximately 0.2%. The US dollar weakened slightly, falling around 0.2%, while Treasury yields moved in different directions.
However, the biggest talking point for precious metals investors was gold.
Why did gold prices fall?
Gold initially experienced some volatility following the announcement. Spot gold eventually dropped to approximately $4,035 per ounce, losing around 0.60% during the session.
The main reason was the Fed's cautious approach towards future interest rates. Although policymakers decided against another increase, the possibility of a December rate hike remained firmly on the table.
Higher interest rates generally put pressure on gold because the precious metal does not pay interest or dividends. When interest rates rise, investors may prefer interest-bearing assets, such as US government bonds, instead of holding gold.
Additionally, expectations of tighter monetary policy can support the US dollar, making gold more expensive for investors using other currencies.
What should investors watch?
The October FOMC meeting highlighted how important interest rate expectations are for financial markets. Investors will now be watching upcoming inflation and employment figures for clues about the Fed's next move, particularly ahead of its December meeting.
For gold investors, the direction of interest rates, the US dollar and inflation will remain important factors influencing prices.