During the post-meeting press conference, Fed Chair Kevin Walsh delivered a hawkish-on-hold message. He stressed that inflation remains far above the 2% long-term target, and it is premature to confirm a sustained downward trend in inflation. Rising energy costs, sticky housing rents and robust corporate investment may reignite inflationary pressures. Walsh declined to offer explicit forward guidance for the September meeting, keeping both further hikes and steady rates on the table. He also confirmed the balance sheet runoff schedule would stay unchanged. The ambiguous remarks heightened market uncertainty and triggered divergent moves across the US Treasury curve. While the 2-year Treasury yield edged lower, the 30-year yield surged above 5.2%, hitting its highest level since 2007. The jump in long-dated yields reflected investors’ worries about prolonged high interest rates and mounting US fiscal interest burdens.

Ahead of the rate decision, markets priced in hawkish risks, pushing spot gold down toward the critical 4000 US dollar level. After the release of the statement and Walsh’s remarks, traders priced out the risk of imminent rate hikes. The US Dollar Index pulled back from highs, short-term Treasury yields declined, offering strong support for non-interest-bearing gold. London spot gold rebounded sharply from lows and peaked at 4116 US dollars, registering a fluctuation range exceeding 120 US dollars within 24 hours. During the Asia trading session on July 31, gold eased off highs and traded near 4070 US dollars, lacking sufficient bullish momentum to break above 4100 US dollars amid fierce battles between longs and shorts.

Market pricing on the CME FedWatch Tool shifted notably. The probability of a 25-basis-point rate hike in September fell to roughly 30%, while odds for unchanged rates climbed to 70%. Lower hike expectations are theoretically bullish for gold. Nevertheless, market participants hold divergent views. Analysts point out that although cooled hike expectations offer short-term support, the Fed has not shifted to a dovish stance. Rate cuts are unlikely within this year, and persistently high real interest rates will cap gold’s upside in the medium and long run.

Position data revealed split sentiment among COMEX gold speculators. Large institutional investors added bullish positions on dips, while short-term retail traders took profits on the bounce. Global gold ETF flows showed regional disparity: ETFs in Europe and the United States saw steady modest outflows, whereas physical gold demand and central bank purchases in Asia underpinned market bottoms. The World Gold Council reiterated that central banks across the globe will continue diversifying reserve assets by accumulating gold, forming lasting underlying support that limits deep corrections.

Major investment banks hold conflicting outlooks. Goldman Sachs maintained a bullish stance, arguing that geopolitical tensions, mounting global debt and weakening US dollar credibility remain long-term bullish drivers. A new rally in gold will likely unfold once the Fed concludes the rate-hike cycle. In contrast, JPMorgan and Deutsche Bank warned of near-term risks. A rebound in inflation and resilient employment data could prompt the Fed to resume hikes in September, triggering another gold selloff with key support located between 3980 and 4000 US dollars.

All eyes will remain on upcoming US economic indicators that shape the Fed’s September policy bias. The preliminary University of Michigan consumer sentiment and inflation expectations data are due out this Friday, followed by nonfarm payrolls and CPI figures next week. Hot inflation and strong employment data will lift hike odds, boosting the US dollar and Treasury yields and weighing on gold. On the contrary, cooling inflation and labor data will reinforce expectations of prolonged steady rates and benefit gold’s attempts to test resistance levels.

Geopolitical risks in the Middle East remain a wildcard. Any sharp escalation will trigger safe-haven buying and introduce extra volatility. At present, gold has transitioned from a trending market into a wide consolidation range. Price swings are predominantly driven by Federal Reserve policy expectations. Every major US economic release will trigger linked volatility in the US dollar and Treasury yields, bringing sharp short-term fluctuations to gold.

Disclaimer: This article serves only as an objective market analysis. It does not constitute investment or trading advice. Precious metals and foreign exchange derivatives carry extreme volatility and substantial financial risks.