How Kevin Warsh first Fed meeting could shift Gold prices

Gold traders are currently obsessed with inflation, interest rates, and the US Dollar. But what if the biggest risk to Gold isn't any of those right now? 

For the first time, markets will hear from Kevin Warsh after his first FOMC meeting as Fed Chair. When a new Fed Chair takes over, markets focus intensely on the entire policy decision framework. Let’s dive into what traders should expect from the first Warsh-led FOMC meeting, why the market will focus more on communication than rates, and how the outcome can impact Gold prices.

The Warsh era begins: focus on policy framework

Historically, traders scrutinized the first meeting under a new Fed chair mainly for credibility, with one key question haunting minds: Will Kevin Warsh continue the existing policy framework?

The Fed Chair has only one official vote. And Warsh inherits a hawkish committee: more than half of the Federal Open Market Committee (FOCM) voting members have been clearly hawkish in their recent public appearances. But the chair still influences the agenda, debates, and messaging that shape market expectations.

That's why markets often react more to what the chair says than to the actual rate decision itself, or even the forward guidance delivered through the statement and the dot plot. 

Will Warsh shift the tone? For Gold traders, this is critical, as the non-yielding bullion doesn't just respond to rates: it responds to expectations. And expectations can change very quickly when Warsh takes the rostrum at his debut post-policy meeting press conference. His words and tone will be closely scrutinized.

What to expect

Markets widely expect the Fed to hold the federal funds rate steady in a range of 3.5% to 3.75%. The central bank will also release the updated Summary of Economic Projections (SEP). The updated dot plot will be closely watched for clues on the Fed's policy path, with the median forecast projecting a shift from a 25 bps cut to a 25 bps hike in 2026.

And then, 30 minutes after the decision, Warsh takes over. All eyes will be on him as he addresses the media, with the focus not only on his outlook on inflation and growth, but particularly on liquidity conditions and the balance sheet. These elements could be a focus during Warsh’s tenure as Fed chair.

Any mentions by the new Fed chair of a potential reduction in the Fed’s balance sheet could be seen as hawkish, hurting US Dollar liquidity and USD-denominated assets like Gold. The biggest move may happen when Warsh starts answering questions from the press.

Two potential scenarios for Gold

Scenario 1: Gold dives on a cautious or hawkish hold

Having bounced above $4,300 in the last trading days, Gold could return to sell-the-rally mode on a hawkish Fed outcome and head toward the psychological $4,000 level. 

That is likely if the new chair prioritizes inflation control and policymakers foresee a rate hike this year. It would signal a higher-for-longer view and weigh on Gold. Additionally, hints on balance sheet reduction could also trigger a sell-off.

Scenario 2: Gold rebounds on a less hawkish Fed

If Warsh joins the majority in holding rates or dissents for a cut, and/or sounds less worried about inflation than growth, the US Dollar could weaken sharply. That would help Gold extend its advance toward the $4,450 resistance, around where the 200-day SMA aligns.

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)