Gold crashes below $3,280 as Powell pushes back on September rate cut
- Gold tumbles over 1.5%, drops below $3,280 after Fed holds rates in 9–2 split.
- Powell dismisses near-term cut, says “tariff passthrough may be slower than thought.”
- Q2 GDP beats but shows softer consumer spending, weak business investment.
- Traders now see 45% chance of September rate cut, down from 60% pre-Fed.
Gold price tumbled over 1.50% on Wednesday after the Federal Reserve, decided to hold rates unchanged, on a 9-2 split vote. Fed Chair Jerome Powell's leaning hawkish at the press conference, alongside strong Gross Domestic Product (GDP) figures for Q2 2025, weighed Bullion prices. At the time of writing, XAU/USD trades below $3,280 after hitting a high of $3,334.
Risk appetite turned sour after the Fed Chair Jerome Powell pushed back against a rate cut at the September 16-17, adopting a meeting-by-meeting approach. This and uncertainty of when inflation would show tariffs effect on prices, sponsored Gold’s next leg down, below $3,300 toward the daily low of $3,268.
“Tariff passthrough to prices may be slower than thought,” Powell said.
Meanwhile, the Fed monetary policy statement revealed that growth of economic activity has moderated in the first half, though the unemployment rate remains low and inflation remains “somewhat elevated.”
The statement revealed the committee’s commitment to achieve maximum employment and inflation at a rate of 2% and acknowledged that “Uncertainty about the economic outlook remains elevated.”
Data released earlier, showed that Gross Domestic Product (GDP) in the second quarter of the US. Although the print is positive, the report showed that consumer spending weakened and business investment slowed sharply. Reuters revealed that most economists estimate GDP for the full year at 1.5%, below the 1.8% foreseen by the Fed.
Other data showed that private hiring resumed, according to the ADP National Employment Change in July.
The CME FedWatch Tool indicates that markets are pricing in a 45% 60% chance of a 25-basis-point rate cut by the Fed at the September 17 meeting, down from 60% before the Fed’s decision.
The docket for the remainder of the week will feature core Personal Consumption Expenditures (PCE), Initial Jobless Claims, Nonfarm Payrolls (NFP) figures and the ISM Manufacturing PMI.
Daily digest market movers: Gold plunges below $3,300, post Fed and US GDP data
- Gold price is pressured due to rising US Treasury yields, which are also boosting the Greenback. The US 10-year T-note yield is up four basis points (bps) at 4.36%. US real yields are also climbing four bps to 1.884%.
- The US Dollar Index (DXY), which tracks the buck’s performance against six currencies, is up 0.55% at 99.43.
- The US Commerce Department revealed that GDP for Q2 2025 rose by 3% QoQ, up from Q1's -0.5% contraction and above forecasts for 2.4% growth. At the same time, the ADP National Employment report for July came in at 104K, crushing forecasts of 78K and better than the -33K plunge in June.
- Pending Home Sales deteriorated in June and dropped -0.8% MoM after May’s 1.8% increase, sponsored by higher mortgage rates.
- Consumer Confidence improved in July, according to the Conference Board (CB), though some comments of the survey showed households are struggling to find jobs.
- A Reuters poll revealed that market participants expect the Gold price to average $3,320 a troy ounce in 2025 and $3,400 for 2026.
XAU/USD technical outlook: Gold nosedives but remains bullish above $3,250
Gold price remains upwardly biased despite sitting below $3,300 and reaching a three-week low. The Relative Strength Index (RSI) turned bearish, showing that momentum favors sellers. However, a “dovish” tilt by the Fed could drive the XAU/USD price toward the day’s high of $3,334, ahead of $3,350.
On the flip side, a hawkish hold clears the path to test the confluence of the 100-day Simple Moving Average (SMA) and the June 30 low near $3,242 and $3,250, respectively.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Author
Christian Borjon Valencia
FXStreet
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
