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Gold extended losses on Wednesday after the US Federal Reserve expectedly lowered interest rates while signalling a more cautious approach to monetary easing next year.
Spot gold was down 0.9% to $2,622.44 an ounce by 2:40 p.m. ET following the announcement, trading near a three-week low. US gold futures also declined over 1.0% to $2,633.80 an ounce.
Meanwhile, both Treasury yields and the dollar surged after the Fed rate decision, contributing to bullion’s decline.
As expected, the US central bank lowered its benchmark interest rate for a third consecutive time, but reined in the number of cuts they expect in 2025, signaling greater caution over its monetary policy.
New forecasts showed several officials penciled in fewer rate cuts for next year than they estimated just a few months ago. They now see their benchmark rate reaching a range of 3.75% to 4% by the end of 2025.
While markets had already priced in 25-basis-point rate cut during this week’s Fed meeting, the chances of another reduction in January stand at only 19%, according to the CME FedWatch tool.
Traders are also watching out for key US GDP and inflation data due later this week, which could further shape expectations around monetary policy.
“I do see the consolidation as a continuation pattern within the longer term uptrend in gold. I think that trend will re-exert itself in the first quarter of 2025,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.
Grant highlighted that the precious metal remains underpinned by easing central bank policies, geopolitical tensions, sustained buying by central banks and rising global political instability.
UBS echoed this sentiment in a note, predicting gold would “build on its gains in 2025.”
The bank emphasized that central banks are likely to continue accumulating gold as they diversify reserves, while heightened demand for hedges could drive inflows into gold-backed ETFs.
(With files from Bloomberg and Reuters)
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