Gold prices fluctuated between $3,035 and $3,050 on Wednesday, reaching a record high of $3,052 after the U.S. Federal Reserve (Fed) decided to keep interest rates unchanged. At the time of writing, gold is trading in a volatile range, up more than 0.20%.
Fed Maintains Rates, Signals Future Cuts
The Fed left its benchmark interest rate steady at 4.25%-4.50% and announced plans to slow its balance sheet reduction starting in April. Officials acknowledged that the labor market remains strong but noted that inflation is still slightly elevated. The central bank reaffirmed its commitment to monitoring economic risks.
The Fed’s economic projections indicate that policymakers expect two rate cuts in 2024. The federal funds rate is projected to remain at 3.9%, unchanged from December’s forecast. Other key economic indicators, including inflation and unemployment, were revised higher.
The U.S. economy is expected to grow at a rate below 2%, reflecting signs of fragility amid trade policies implemented by former President Donald Trump.
Powell Addresses Economic Uncertainty
After the Fed’s decision, Chair Jerome Powell acknowledged growing economic uncertainty and noted that inflation driven by tariffs has affected consumers. He stated, “Our current policy stance is well positioned to deal with the risks and uncertainties we face.”
Geopolitical Tensions Boost Safe-Haven Demand
Gold’s rally was further supported by escalating geopolitical tensions. Ceasefire talks between Russia and Ukraine have stalled, and Israel intensified its airstrikes, reportedly killing 400 people on Tuesday, according to Reuters. The heightened instability has increased demand for safe-haven assets like gold.
Market Movements: Gold Poised for Further Gains
The yield on the U.S. 10-year Treasury note fell three basis points to 4.254%. Meanwhile, the U.S. Dollar Index (DXY), which measures the dollar against a basket of six major currencies, rose 0.27% to 103.54.
Real yields, measured by the U.S. 10-year Treasury Inflation-Protected Securities (TIPS), dropped 5.5 basis points to 1.935%, reinforcing gold’s upward momentum.
The Fed’s latest economic projections show:
- The federal funds rate is expected to remain at 3.9% in 2025, drop to 3.4% in 2026, and reach 3.1% in 2027.
- Economic growth is projected at 1.7% in 2025, down from 2.1%. Growth for 2026 and 2027 is forecasted at 1.8%.
- Unemployment is expected to range between 4.3%-4.4% through 2027.
- Inflation (PCE) is forecasted at 2.7% in 2025, 2.2% in 2026, and 2% in 2027.
- Core PCE inflation is projected to end 2024 at 2.8%, higher than the previous 2.5% estimate, before declining toward the Fed’s 2% target by 2027.
The money market has priced in 65.5 basis points of Fed rate cuts in 2025, causing U.S. Treasury yields to decline alongside the dollar.
Gold Technical Outlook: Eyes on $3,100
Gold remains in a strong uptrend and could extend its gains, potentially testing the $3,100 level. The metal broke through the key psychological barrier of $3,050, but it has yet to show enough momentum to reach a new milestone.
The Relative Strength Index (RSI) indicates overbought conditions, though it remains below the critical 80 level.
If gold falls below $3,000, initial support is expected at the February 20 high of $2,954, followed by the $2,900 mark.
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