Gold settled near $4,710 per ounce on Monday as traders positioned for a pivotal Federal Open Market Committee meeting that begins Tuesday — one widely expected to be Jerome Powell's last as chair of the Federal Reserve. Spot gold traded around $4,708 while futures held near $4,714, leaving bullion roughly 15% below its January 29, 2026 record of $5,595 but still up more than 25% since the start of 2025.
A Fed Boxed In By Inflation
The April 28-29 meeting will not produce a fresh dot plot or Summary of Economic Projections, putting unusual weight on the policy statement and Powell's press conference. Markets overwhelmingly expect the Committee to leave the federal funds target range unchanged at 3.50%-3.75%. The CME FedWatch tool now shows zero probability of a cut at this meeting and only about a 30% chance of any cut by December — a sharp reversal from the start of the year, when traders had penciled in multiple reductions.
The hawkish repricing followed March CPI data from the Bureau of Labor Statistics, which showed headline inflation running at 3.3% year-over-year, the highest reading since May 2024. Goldman Sachs has since pushed its rate-cut forecast back to September and December.
Oil Shock Reignites Stagflation Debate
Driving the inflation surprise is the partial blockade of the Strait of Hormuz that followed the late-February escalation between the United States, Israel and Iran. Analysts estimate the disruption has removed roughly 8 million barrels per day of supply from global markets, lifting energy costs and complicating the Fed's path.
Powell has publicly resisted the stagflation framing, telling reporters last month that "this is not the situation we're in," even as he acknowledged that the central bank's dual mandate goals are now in tension. HSBC analysts argued in a note that "fiscal risks and stagflation fears will support gold prices even without Fed rate cuts," a view increasingly echoed across Wall Street research desks.
Powell's Exit and the Warsh Question
Tuesday's gathering may also mark Powell's final press conference. Kevin Warsh, the former Fed governor nominated by President Trump, is positioned to take over when Powell's term as chair ends next month, pending Senate confirmation. Investors will scrutinize Powell's tone for any departing signal on the policy path his successor inherits.
Central Bank Demand and Lofty Targets
Beneath the macro headlines, structural support for gold remains intact. JPMorgan's commodity research desk models roughly 800 tonnes of official-sector gold buying in 2026, broadly consistent with the World Gold Council's 863-tonne figure for 2025. That persistent bid has helped institutional forecasters keep year-end 2026 targets aggressive: Goldman Sachs at $5,400, Union Bancaire Privée at $6,000, and JPMorgan at the high end at $6,300.
For now, traders are content to wait. With the FOMC statement due Wednesday afternoon and Powell's likely valedictory at the podium, gold's next directional move could be set within 48 hours — and the bar for surprise, after months of hawkish recalibration, is low.
Sources: Kitco News, Morningstar, FXStreet, CNBC, Yahoo Finance, BullionVault, Goodreturns