The trading session was dominated by the market digesting a Federal Reserve decision that came across as more hawkish than expected. While the Fed held interest rates steady, the accompanying signals shifted expectations dramatically toward future tightening. Investors are now pricing in an 88% chance of a rate hike by December — a sharp jump from the 61% probability that prevailed before Wednesday's decision. The key driver of that repricing was the central bank's own internal projections: nine of the 19 policymakers signaled they expect at least one rate hike later this year.
The Dollar, Gold, and Inflation Fears
The hawkish tilt sent the U.S. dollar to a fresh one-year high. A stronger dollar, in turn, pressured gold prices. Gold also slipped because easing tensions between the United States and Iran reduced inflation fears, removing one of the supports that had been underpinning the metal. That same easing in geopolitical tension pushed oil prices lower, which compounded the headwinds gold faced from the stronger currency.
Despite this recent pullback, the case for gold over the longer term remains constructive in the view of precious-metals bull David McAlvany, who maintained a year-end target range of $5,500 to $6,300. At the close, gold finished at about $4,235.20 — well below that target, implying a sizable expected move higher to reach it.
Oil's Volatile Session and Falling Gas Prices
Oil had a striking intraday swing. Both U.S. crude and Brent fell more than 3% during the session, only to close the day roughly unchanged. The recovery from the lows came after Vice President J.D. Vance said that tankers carrying more than 12 million barrels of oil crossed the Strait of Hormuz overnight. For context, on a normal pre-war day, roughly 14 million barrels of oil and 6 million barrels of refined products would pass through the strait. The fact that significant volumes were still flowing — even if below the pre-war norm — helped steady prices.
The broader downward trend in crude over the past several days has flowed through to consumers at the pump. The national average price of gasoline dropped below $4 for the first time since March, with drivers paying an average of $3.99. Prices have continued to decline as the potential resolution to the conflict has eased supply concerns. Notably, the cost of a gallon of gas has fallen for 28 consecutive days, after peaking at $4.56 on May 21st. That streak represents the longest stretch of consecutive price declines since November of 2023.
Semiconductors Rally to Close the Week
Chip stocks were positioned to rally into the end of the week, buoyed by two catalysts: a boost from Intel and presidential commentary about a deal with Apple. The president posted on Truth Social that Apple and Intel had agreed to work together "to design and build its chips in America." The optimism spread across the sector, with fellow semiconductor names such as Nvidia and Micron also moving higher. The SOX semiconductor index closed the day up 6.6%.
The Week Ahead: PCE Inflation and Fed Speak
With tomorrow, June 10th, being a market holiday (markets closed), attention turns to the following week. The major data point on the radar is the PCE reading — the Federal Reserve's preferred inflation gauge, at least historically. Economists expect the data to show persistent inflationary pressure. Headline inflation is projected to come in roughly in line with the prior month at around 3.8%, while core inflation is expected to rise to 3.4%, a slight uptick from April.
Reinforcing the inflation narrative, the Federal Reserve revised its end-of-year 2026 inflation outlook upward in its projections, now predicting that PCE inflation will close the year at 3.6% before moderating in 2027.
Fed communication will also be in focus. Austin Goolsbee is expected to speak on Thursday. Separately, Kevin Warsh signaled a preference to speak only when there is something substantive to be said, and indicated he wants to adjust communication policy so that it does not include forward-looking guidance. An open question heading into next week is whether the rest of the Fed will adopt a similar approach to communication.
