Gold Steady as Fed Holds Rates, But Talks of Cuts and Global Risk Keep Prices Supported
Federal Reserve held interest rates steady at 4.25%–4.50%—as expected—while signaling that two rate cuts may come later this year.
The Fed kept a cautious tone due to persistent inflation, the economic effects of Trump’s tariffs, and ongoing geopolitical uncertainty—especially the Israel‑Iran situation.
U.S. economic data showed weakness (elevated jobless claims, slowing retail sales and industrial output), supporting the view that rate cuts are likely.
The Fed’s new “dot plot” confirms policymakers still foresee two rate cuts this year, though some expect none.
What This Means for Gold
1. Rates stayed high—for now
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No immediate rate cut removes some incentive for gold, since gold doesn’t earn interest.
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But the hint of future cuts keeps investors interested in gold longer-term.
2. Inflation worries persist
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The Fed signaled inflation remains stubborn—even with soft economic data.
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That’s usually good for gold, since investors often buy it to protect against inflation.
3. Global uncertainty looms
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Ongoing conflict in the Middle East and trade tensions add safe‑haven demand for gold—even if rates didn’t drop immediately.
How Gold Reacted
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Spot gold dipped slightly (~0.2%) to around $3,381/oz, as markets paused ahead of the Fed decision.
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But analysts remain upbeat: Gold is expected to rise if inflation stays sticky and the Fed begins cutting later in 2025.
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Goldman Sachs even projects gold could hit $3,700/oz by end-2025 and $4,000/oz by mid-2026, supported by central bank purchases and ETF inflows.
Summary Table
| What Happens | Impact on Gold |
|---|---|
| Fed holds rates but signals cuts | 📈 Mild support (future hope) |
| Inflation remains above target | 📈 Boosts gold appeal |
| Global tensions continue | 📈 Safe-haven demand rises |
| Rate cuts actually begin | 📈 Gold likely to surge more |