Where is Gold heading to?
The upcoming weeks will be crucial for a further gold price outbreak.
Ibrahim Al-TarikOctober 5, 2026
The latest FOMC statement and economic outlook signal that interest rates will stay at zero through the end of 2023. This is excellent for gold. On Wednesday, the Federal Reserve issued a statement on the FOMC meeting, which was held September 15-16. The US Federal Reserve left interest rates and its quantitative easing conditions unchanged. The chart below shows the effective federal funds rate and the Fed's balance sheet. Nonetheless, the statement has been significantly changed from the July edition as it reflects the central bank's new monetary policy strategy adopted at the end of August, which assumes that the 2% inflation target is achieved over time rather than on an annual basis. First of all, the committee members recognized the move from a flexible inflation target to a flexible average inflation target that allows for subdued inflation to be offset in a period with later higher inflation: The committee aims to maximize employment and inflation at a rate of 2 percent over the long term. With inflation consistently below this longer-term target, the Committee aims to keep inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee believes that it will maintain an accommodative monetary policy stance until these results are achieved. Second, and perhaps more importantly, the Fed has announced that the new economic conditions must be met before interest rates are raised. Previously, the US Federal Reserve launched its tightening cycle when it was confident that the economy was "on track to meet its maximum employment and price stability targets." Aside from that point, the Fed will not raise interest rates until inflation hits 2 percent and is on the way to surpass that level: The committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it to be reasonable to maintain this target range until labor market conditions reach levels consistent with the committee's estimates of the maximum Employment and inflation has risen to 2 percent and is on the way to rise moderately above 2 percent for some time. What does the above mean for the gold market? Well, the Fed's statement is clearly deaf as it signals that the Fed will not give up its zero interest rate policy for years. The US Federal Reserve has made tightening starts conditional on stricter conditions, and since the extremely low nominal bond yields and negative real interest rates will be with us for much longer, investors should get used to what should help the gold price in this process. As the statement shows, however, the changes in the Fed's monetary policy framework that are already known need not have a material impact on the gold market in the short term.
