Gold in the Spotlight Ahead of the Fed's Decision, Market Debates 25 bps or 50 bps Cut
Global gold prices are moving cautiously ahead of the Federal Reserve's (Fed) interest rate policy announcement scheduled for tonight local time. The market believes the outcome of the FOMC meeting will be a key determinant of the precious metal's short-term direction, with debate focused on whether the US central bank will cut interest rates by 25 basis points (bps) or take a more aggressive 50 bps move.
Most analysts consider the 25 bps cut scenario the most likely scenario, in line with market expectations already reflected in prices. "A 25 bps cut would lower bond yields and weaken the US dollar, thereby reducing the opportunity cost of holding gold," said an analyst from Capital.com. In this scenario, gold has the potential to continue rising toward the US$3,700–US$3,800 per troy ounce range, although the potential for profit-taking after the announcement remains open.
However, the 50 bps rate cut scenario is seen as a much more bullish catalyst. Several analysts say the Fed's aggressive move will deepen the dollar's weakness and significantly lower bond yields, paving the way for gold to test the psychological level of US$4,000/oz in the near term. "If the Fed sends a strong dovish signal, gold could surge faster than expected," said a global commodity market analyst.
However, risks also lurk. If a more aggressive rate cut is implemented without sufficient inflation data, market confidence in the Fed's independence and credibility could be shaken. This could trigger high volatility in the bond and currency markets, which in the short term could depress gold prices.
With market expectations leaning toward a 25 bps rate cut, investors are now awaiting not only the magnitude of the cut but also signals about the direction of future policy. Whether the Fed leaves room for further cuts or chooses a cautious stance will be a determining factor in gold's future trend.
Source: Newsmaker.id
