Gold Slips After Fed Signals Caution
Gold prices fell from their recent record high, about $70 below their peak of $3,707.57 per ounce. The decline came after the Fed cut interest rates 25 basis points but cautiously signaled room for further cuts through 2025, prompting market participants to remain cautious.
While lower interest rates typically benefit gold as a non-yielding asset, gold closed 0.8% lower on Wednesday. Chairman Jerome Powell emphasized that further decisions will be "meeting by meeting" and warned of inflationary risks from tariffs, making the policy tone less dovish than market expectations.
The strengthening US dollar also pressured gold by making it more expensive for holders of other currencies. However, its year-to-date performance remains impressive: gold is still up nearly 40% thanks to increased safe-haven demand amid trade and geopolitical turmoil, central bank buying, and ETF inflows.
Political factors surrounding the Fed are also in the spotlight—from the legal dispute involving Governor Lisa Cook to Stephen Miran's dissent in favor of a 50-bps cut. Amid the uncertainty, bullish projections are emerging: Goldman Sachs believes gold could approach $5,000 if 1% of private Treasury holdings shift to gold, while Deutsche Bank raised its median forecast to $4,000 next year. Last week, gold traded at $3,638.41 per ounce (2:47 p.m. Singapore time), with the Bloomberg Dollar Index up 0.2%; silver and palladium weakened, and platinum strengthened slightly.
Key points:
Gold corrected ±$70 from a record $3,707.57 after the Fed's cautious tone.
Powell: The next interest rate decision will be "meeting by meeting."
The dollar strengthens → additional pressure on gold prices.
Gold is still up ~40% year-to-date thanks to safe-haven demand and central bank buying.
Extreme outlook: Goldman's scenario is near $5,000; DB projects an average of $4,000 by 2026.
Source: Bloomberg.com
