Gold prices rebounded sharply from post-FOMC lows to trade just above $4,350/oz shortly after the US market open on Friday, positioning the yellow metal for a moderate weekly gain. The recovery followed an initial drop tied to Federal Reserve projections of elevated inflation and further tightening, which was offset by a retreat in crude oil prices and easing US Treasury yields.

Market Context

The Federal Reserve delivered the week's primary macro event on Wednesday, unanimously raising policy rates by 25 basis points. This marks the US central bank's first hike since 2023. Markets had already implied a greater than 80% likelihood of a hike earlier in the week due to stubbornly elevated inflation data and global oil market conditions implying further price increases. While the hike itself was expected, gold's initial sharp drop appeared driven by projections showing another 25-basis-point increase before the end of 2026.

Analysis

Thursday brought a significant countermove as crude oil slid back toward and then below $100 per barrel, causing US Treasury yields to ease and allowing gold to recover to around $4,360/oz. The Bank of Japan's overnight rate hike to 1.25% added another tailwind into Friday. Analysts had generally prepared for a flat or negative week for gold, assuming the rate hike was fully priced in given recent slides in spot pricing. However, the interplay between oil prices, yield movements, and global central bank policy created unexpected volatility and a subsequent rebound.

Key Numbers

- Gold rebounded to just above $4,350/oz on Friday, up from a post-FOMC low near $4,260/oz.

- The Federal Reserve raised policy rates by 25 basis points unanimously on Wednesday.

- Crude oil prices retreated below $100 per barrel on Thursday.

- The Bank of Japan raised its overnight rate to 1.25%.

- Markets implied an 80%+ likelihood of a Fed hike prior to the announcement.

What to Watch

Next week's macroeconomic calendar is relatively light. Traders should focus on public comments from key FOMC participants and monitor renewed moves in oil, US Treasury yields, and the US Dollar as primary catalysts for gold price direction. The sustainability of the rebound will likely depend on whether inflation expectations remain elevated and if further tightening signals emerge from the Fed.