FOMC and gold: Fed decisions and XAUUSD

The Federal Open Market Committee (FOMC) sets US interest rates. Because gold pays no interest, the Fed is the single most important driver of gold in the long run, and FOMC days are among its most volatile.

The schedule

• Eight scheduled meetings a year.
• 2:00pm New York time: rate decision and statement (and, at four meetings a year, new projections including the “dot plot”).
• 2:30pm: the Fed chair’s press conference.

Two reactions, sometimes opposite

1. The statement. Was the decision expected? Did the wording turn more hawkish (higher rates for longer: gold down) or dovish (cuts sooner: gold up)?
2. The press conference. Answers to reporters often move markets more than the statement, and can reverse the first move completely.

What gold responds to

It’s not the rate decision itself, which is usually priced in, but the path: how many cuts or hikes the Fed signals, and how worried it sounds about inflation versus jobs. Lower expected real rates support gold. See gold and real yields.

Trading FOMC days

• The hours before are often quiet and choppy. Many traders do nothing.
• Expect spreads to widen at 2:00pm and stops to slip.
• If you hold a trade through the decision, size it so a $30 spike against you is acceptable.
• Fed speeches in the following days can extend or reverse the move.