Gold prices fell more than 2% to a one-month low on Wednesday after the U.S. Federal Reserve lowered interest rates as expected, but indicated that the pace of future rate cuts will slow. This hawkish stance by the Fed bolstered the U.S. dollar and pushed bond yields higher.
By 03:56 p.m. EST (2056 GMT), spot gold had dropped 2.1%, reaching $2,589.91 per ounce—its lowest level since November 18. Meanwhile, U.S. gold futures settled 0.3% lower at $2,653.30.
“Markets are climbing a wall of worry into the close as Fed Chair Jerome Powell signals slower rate cuts, contingent on further progress in controlling inflation,” said Tai Wong, an independent metals trader. “Gold is slumping below $2,600, which could unsettle some bullish investors,” he added.
The Federal Reserve released updated projections, indicating two quarter-percentage-point rate cuts next year. This cautious forecast aligns with a “wait-and-see” approach, especially as inflationary pressures persist. Powell reiterated that the Fed is looking for more substantial progress in reducing inflation before making further cuts.
The stronger dollar, which surged more than 1% to reach a two-year high, made gold more expensive for holders of other currencies. Additionally, the benchmark U.S. 10-year Treasury yield climbed to a four-week high.
Traders are now focused on upcoming U.S. GDP and inflation data, set to be released later this week, which could further influence market expectations for monetary policy.
Despite the recent slump, Peter Grant, vice president and senior metals strategist at Zaner Metals, remains optimistic about gold’s long-term prospects. “I view the current consolidation as part of a longer-term uptrend in gold, which I believe will reassert itself in the first quarter of 2025,” he said.
Elsewhere in the precious metals market, spot silver fell 3.5% to $29.45 per ounce, platinum dropped 2% to $919.25, and palladium declined 3% to $906.88.
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