Gold falls below $4,850 as Fed holds rates steady

Gold price tumbles to around $4,830 in Thursday’s early Asian session.
Fed left interest rates unchanged on Wednesday and continued to expect one rate cut this year.
Ongoing war in Iran could support the Gold price, a safe-haven asset.

Lallalit Srijandorn FXStreet

Gold price (XAU/USD) faces some selling pressure near $4,830 during the early Asian session on Thursday. The precious metal declines for a sixth consecutive day, its longest losing streak since late 2024, as Federal Reserve (Fed) Chair Jerome Powell said higher energy prices will push up overall inflation.

The Fed held interest rates steady at its March meeting on Wednesday, maintaining the benchmark Federal Funds Rate in a target range of 3.5% to 3.75%. This was the second meeting in a row with no change as policymakers navigate economic uncertainty fueled by the ongoing war in Iran and persistent inflation.

The central bank signaled that it still expects one cut this year, even though traders pull back their bets for rate reductions in 2026. “Powell has somewhat walked back the statement, which wasn’t as hawkish as feared, but focusing on the dual mandate, keeping rates restrictive for longer,” said Nicky Shiels, head of metals strategy at MKS PAMP SA.

On the other hand, escalating tensions in the Middle East might boost the safe-haven flows, benefiting the precious metals. Iran and Israel traded strikes on key energy facilities in the Middle East.

The strike followed a warning from Iranian army chief Amir Hatami, who vowed to launch a “decisive and regrettable” retaliation for the killing of security chief Ali Larijani in an Israeli air strike.

Gold FAQs

Why do people invest in Gold?

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.

Who buys the most Gold?

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.

How is Gold correlated with other assets?

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.

What does the price of Gold depend on?

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

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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