Gold prices rebounded from a one-month low on Thursday after the Federal Reserve delivered a widely anticipated interest rate cut. However, the central bank’s hawkish tone on future rate reductions cast uncertainty over bullion’s outlook.
Prices had slumped over 2% overnight following the Fed’s policy meeting, which signaled fewer rate cuts in 2025 due to persistent inflation concerns.
Spot gold climbed as much as 1.3% to $2,618.11, while February gold futures dropped 1.2% to $2,620.79 an ounce by 22:51 ET (03:51 GMT).
Spot Gold Recovers, but Dim Prospects Amid Slower Rate Cuts
The Fed reduced interest rates by 25 basis points but indicated a slower pace for future cuts.
Lower rates generally support gold prices by reducing the opportunity cost of holding non-yielding assets like bullion. However, the sharp decline in gold futures reflected expectations of prolonged higher rates. Markets have ruled out a rate cut in January and now anticipate only two reductions in 2025, down from earlier projections of four.
Fed Chair Jerome Powell stated that further cuts depend on progress in combating persistent inflation, signaling policymakers’ cautious approach in light of potential economic adjustments under the incoming Donald Trump administration.
While the Fed’s hawkish stance aims to control inflation, it also underscores confidence in the U.S. economy’s resilience. This optimism has shifted sentiment towards riskier assets, potentially weakening demand for gold as a safe haven.With fewer rate cuts anticipated in 2025, the dollar is expected to strengthen further, bolstered by a surge to a two-year high on Wednesday.
Meanwhile, the Bank of Japan kept interest rates unchanged on Thursday as policymakers adopted a cautious approach toward Japan’s economic outlook and inflation trajectory.
Precious Metals Mixed
Among other precious metals, Platinum Futures gained 0.7% to $928.90 an ounce, while Silver Futures tumbled 2.7% to $29.922 an ounce.
Copper Declines as Dollar Strengthens
In industrial metals, copper prices extended their decline on Thursday, weighed down by the Fed’s hawkish stance, which boosted the dollar. The red metal saw limited support from reports of increased fiscal spending in China, the world’s top importer, for the coming year.
The US Dollar Index rose 0.1% during Asian trade on Thursday, reaching a two-year high following the Fed meeting.
On the London Metal Exchange, Benchmark Copper Futures dropped 1.4% to $8,921.50 a ton, while one-month Copper Futures were mostly steady at $4.089 a pound.
