On Thursday, gold prices fell after investors re-assessed the message from Federal Reserve Chair Kevin Warsh. Despite a pause in policy, inflation expectations, a firmer dollar and a rebound in Treasury yields put renewed pressure on the precious metal.

Geopolitical risks in the Middle East also intensified, and markets are gearing up for key US inflation prints and central bank decisions.

Prices and market action

• At 07:44, XAU/USD was down about 0.4% to settle at $4,049.99/oz, after having earlier rallied to a weekly high of $4,100.42 immediately following the Fed decision.
• Gold futures were up around 0.3% to settle at $4,047.20.
• XAG/USD fell by 0.6% to $57.32.
• XPT/USD dropped by 1.3% to $1,597.87.

The Fed pause initially supported precious metals: Treasury yields eased slightly, and the US dollar index weakened after the Fed statement, which briefly improved gold's appeal. The effect proved short-lived. Investors parsed Chair Warsh's remarks that the Fed remains committed to returning inflation to the long-run 2% goal even as policy is held steady, which cooled interest in non-yielding, high-price assets.

The US dollar index was last little changed around 100.9, while 10-year Treasury yields recovered from the post?decision lows. Those dynamics limited further upside in the metal.

According to CME FedWatch, markets are now pricing in about a 64% chance of a Fed rate hike in September, down from roughly 81% ahead of the policy announcement.

Investors also tracked a fresh escalation in the Middle East after the US launched strikes on Iran overnight. US Central Command described the strikes as a "powerful response" to what it characterised as Iranian attempts to strike US forces the previous day. President Donald Trump had warned of decisive retaliation, saying the US would respond forcefully after what was described as an "unexpected" Iranian attack.

The escalation pushed oil higher as traders re-priced the risk of supply disruption. Shipping concerns intensified too: Iran-backed Houthi forces warned of strikes on Saudi vessels attempting to transit to the Indian Ocean, prompting some tankers to seek alternative routes.

Higher energy demand lifted concerns that inflation may remain "sticky," complicating the Fed's task of easing policy.

Investors are now watching the US PCE price index, the Fed's preferred inflation gauge, due Thursday for fresh signals on inflation prospects and the likely path for interest rates.

Market attention will also focus on policy decisions from the Bank of England and the Bank of Japan later this week. Both are expected to hold interest rates unchanged.