Gold, equities and the dollar face a major test from Warsh’s Fed debut

Markets are heading into today’s Federal Reserve decision in a much calmer position than they were a week ago, but the stakes remain high. The US-Iran ceasefire and sharp fall in oil prices have reduced fears of an energy-driven inflation shock, helping equities recover and easing some pressure on central banks. However, inflation remains above target, the labour market is resilient, and investors are still debating whether the Fed may need to hike later this year. The Fed is widely expected to leave rates unchanged today, so the real focus will be Kevin Warsh’s first press conference and the updated projections.

For equities, the key issue is whether Warsh sounds patient or restrictive. A neutral message — acknowledging lower oil prices while stressing data dependence — could support the recent rebound in the Nasdaq and S&P 500, especially as investors refocus on AI-driven earnings growth. But if Warsh leans too heavily into inflation risks or signals that rate hikes remain firmly on the table, equity valuations could come under pressure again. After such a powerful rally, markets remain vulnerable to any suggestion that risk-free rates may need to move higher.

Nasdaq 100 daily chart

Past performance is not a reliable indicator of future results.

Gold is in a more complicated position. Lower geopolitical risk and higher real-rate expectations have weighed on the metal recently, but gold has found some support as investors wait for clarity from the Fed. A less hawkish Warsh could help gold by lowering yields and weakening the dollar, while a more hawkish tone would likely reinforce the opportunity-cost argument against holding non-yielding assets. Longer term, central-bank demand remains a structural support, but the near-term direction is likely to be driven by the Fed’s tone on inflation and rates. Technically, the rebound from recent lows suggests buyers remain active at longer-term trend levels, although gold continues to face resistance from the cluster of shorter-term moving averages overhead. Momentum indicators have recovered from oversold territory but remain subdued, pointing to a market that is attempting to base rather than re-establish a clear uptrend.

Gold (XAU/USD) daily chart

Past performance is not a reliable indicator of future results.

For the dollar, today’s meeting is about whether the Fed validates the recent repricing toward “higher for longer.” The dollar has been broadly steady ahead of the decision, with investors reluctant to take a strong view before Warsh’s debut. A hawkish press conference could lift the dollar by supporting rate differentials, particularly against currencies where central banks are becoming less aggressive. A more balanced tone could cap the dollar’s upside and help risk assets extend their recovery.

US dollar index (DXY) daily chart

Past performance is not a reliable indicator of future results.

Overall, Warsh does not need to deliver a major policy shift today to move markets. The decision itself is likely to be uneventful. The risk lies in the communication. If he reassures investors that the Fed can remain patient after the fall in oil prices, equities may continue to recover and gold could stabilise. If he suggests inflation remains too persistent for comfort, markets may quickly return to pricing a more restrictive Fed path.