Gold Price Plunges 2% After Fed Shock, Trump Emerges as Saviour

Gold and silver prices reversed course and weakened after the US central bank, the Federal Reserve, signalled a rate hike by the end of this year. However, a peace deal between Iran and the US helped gold prices improve today. According to Refinitiv, gold prices in trading on Wednesday (17/6/2026) closed at US$ 4,257.68 per troy ounce, plunging 1.7% or nearly 2%. This decline ended a positive trend that had seen prices surge 6.3% over four consecutive days. Gold prices recovered on Thursday (18/6/2026) at 06:16 WIB, strengthening 0.52% to US$ 4,279.71 per troy ounce. On Wednesday US time, the Fed decided to maintain interest rates in the range of 3.50%-3.75%. However, based on the latest projections released after the Fed’s decision, nine of the 19 US central bank policymakers now expect rates will need to be raised this year. The median projection for the Fed Funds rate at year-end now stands at 3.8%, up from 3.4% in the March projection. This increase indicates the committee sees at least one rate hike still necessary in 2026. In his first press conference after chairing a policy meeting as Fed Chair, Kevin Warsh announced the formation of five task forces to review various operational aspects of the central bank in key policy areas. “This is a new Fed. Warsh appeared sharp, confident, and full of energy. He will be a manager, not just a custodian of the institution. His message is clear: change is coming, but through careful consideration,” said Tai Wong, an independent metals trader, as quoted by Reuters. According to Wong, Warsh also twice emphasised that current interest rates are only restrictive for the housing sector. That statement was seen as making him more hawkish than his predecessor, Jerome Powell. “In my view, that is what drove the market weakness. The policy statement and dot plot were hawkish, and Warsh did nothing to dampen that perception,” he said. Based on the CME FedWatch Tool, the market now sees a 78% chance of a rate hike in December, surging from 61% before the Fed’s decision was announced. The US dollar extended its gains after the interest rate decision. This condition makes dollar-denominated gold more expensive for overseas buyers. At the same time, oil prices also rose, maintaining inflation concerns. Although gold is often considered a hedge against inflation, high interest rates typically suppress the appeal of the precious metal because it offers no yield. Spot gold prices even briefly touched their lowest level in more than six months last week after inflation fears stemming from the Iran conflict raised expectations of a rate hike. On the other hand, positive news from the war boosted gold prices. US President Donald Trump and Iranian President Masoud Pezeshkian on Wednesday (17/6/2026) signed a memorandum of understanding (MoU) aimed at ending the war between the two countries, according to a US official speaking to Reuters. The official explained that the document had previously been signed digitally on Sunday by US Vice President JD Vance and Iran’s chief negotiator Mohammad Baqer Qalibaf, and witnessed by Trump. The latest signing by Trump and Pezeshkian is a formal step to strengthen the agreement. The signing marks the latest official step in efforts to halt the conflict that has lasted nearly four months. With the end of the war, inflation is expected to ease, potentially causing the Fed to slightly reduce its hawkish stance and creating an opportunity for gold to rise again.