Gold settles at $4 283 as Fed lifts rates for the first time since 2023

Gold closed at $4 283,54 an ounce in Asian trade on Thursday, up half a percent on the day, after the United States Federal Reserve raised interest rates for the first time since 2023 and US Treasury yields pulled back from the highest level they have reached since 2024.

The metal had touched close to $4 320 earlier in the session, a gain of as much as 1,3%, before giving back part of that advance. Silver, platinum and palladium all moved higher as well. The dollar was slightly stronger, with the Bloomberg Dollar Spot Index up 0,1% after a 0,5% rise on Wednesday.

This is the market story that matters most to South Africa this week, and not only to traders. Gold is this country’s largest mining export, the rand takes its direction from the dollar, and the Reserve Bank’s own interest rate decisions are made in the shadow of what the Fed does. When Washington moves, the cost of money in Johannesburg moves with it.

What the Fed did, and how gold answered

The central bank’s rate-setting committee voted unanimously on Wednesday to lift its policy rate by a quarter of a percentage point. It was the first increase since 2023 and it was widely expected, so much of the effect had already been worked into prices before the announcement.

Yields on US government bonds had jumped to their highest since 2024 immediately after the decision, then retreated through Thursday. Gold usually does badly when bond yields are high, because bullion pays no interest and a saver can earn a return elsewhere. Thursday’s softer yields took some of that pressure off the metal.

“Yields are correcting from the overreaction” of the previous session, said Christopher Wong, a strategist at Oversea-Chinese Banking Corp. That has helped support gold, he said, though he cautioned that high yields and a stronger dollar may keep a lid on the price in the near term.

Why the Fed moved

Rising energy prices linked to the war in the Middle East have fed inflation pressure in the United States, and figures published the previous week showed core US inflation running hotter than economists had expected in August.

The Fed’s own median projection for where rates will sit at the end of 2026 is now 4,1%, against 3,8% before, which signals that the committee sees room for further increases. Chair Kevin Warsh used his briefing after the decision to restate the inflation risk, saying annualised price growth above 3% was showing up across too many categories of goods and services on both a six month and a twelve month view.

The decision also put the Fed at odds with President Donald Trump, who had recently said he would widen his trade measures if rates were not cut. He wrote on social media that rates should be at 1% or lower, but did not single out Warsh by name.

What it means on this side of the ocean

For South African gold producers, a price above $4 200 an ounce is a strong incentive to keep shafts open and marginal ounces in the plan. The metal has held well above the levels that made 2024 and 2025 such good years for the sector, and the higher the dollar price, the more rand revenue each kilogram shipped earns.

That is the positive side of the ledger, and it is real. Mining employment, municipal revenue in the goldfields and the country’s export earnings all benefit when the price holds.

The harder side is the dollar. A Fed that is still tightening while South Africa’s own cycle is looser tends to strengthen the US currency against the rand. A weaker rand raises the price of imported fuel, food and machinery, which is exactly the inflation the Reserve Bank is trying to contain at home.

It also raises the cost of servicing dollar denominated debt for state owned companies and for any South African business that has borrowed abroad. Those costs land on electricity tariffs, on freight and eventually on the shelf price a household pays.

The Reserve Bank’s Monetary Policy Committee does not set its rate to follow the Fed, and it has said so repeatedly. But it cannot ignore a world in which the cost of dollar money has just gone up. Every basis point of extra yield demanded of South African paper is a basis point that has to be paid by someone, and in the end that someone is a taxpayer or a consumer.

What to watch

The Reserve Bank’s next scheduled rate decision is the immediate marker for how much of the Fed’s move is passed through into local borrowing costs. Beyond that, the inflation print for August and the rand’s level against the dollar in the coming weeks will show whether the market treats this as a one-off correction or the start of a longer tightening cycle in Washington.

Source: Moneyweb, Gold rises as US treasuries pare losses following Fed rate hike